Somebody pulled the plug on PMs again...

Sorry Inflexion but I do not view a lawsuit as proof of anything.

Commodity trading, (and that is what PM investing is), has never been for the faint of heart. There has always been volatility. People making and losing their fortunes on pokr bellies are legendary. Commodities go up adn down quickly at times, and the sad truth is there does not have to be some kind of evil boogeyman to blame. Some other commodities are even more volatile than silver, are they also being manipulated?

I am simply saying if something goes up it doesn't have to mean you are smart and right, and if something goes down it doesn't have to mean someone is manipulating your market and breaking the law. Could those things be true? Yeah, but way too many PM people seem to think they are ALWAYS responsible.

Not posting this about you Inflexion, just in general since it seems many people tend to always think losses are the fault of someone, but their gains are because they are smarter than the rest of the investors. The truth is PM are a somewhat volatile commodity, silver especially, and with volatility comes potentially great profits, but potentially equally great losses, and many times no one is to "blame".

 

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My guess is hedge fund managers taking a bath in stocks and selling their prescious metal positions to raise cash.

High frequency trading amounts to 50% + of the overall market volume. The machines have taken over with what is essentially the concept of micro second arbitrage.

I'm happy owning Pepsi, Exxon, 3M...

Will look to buy physical gold as a savings vehicle over and above my cash emergency fund... it's not an investment to me.

 

That is my initial impression also. If it is true, the downward move, however scary, should end within a week or two. If it doesn't then the silver bull market may be in trouble. Too soon to know.

 

You really think so? I don't know of a lot of hedge fund guys who dabble in stocks and commodities. They usually try to specialize to maximize knowledge. I didn't know a large percentage of them had sizable gold holdings, and eve if they did what are they raising money for now? Margin calls? I would buy this a lot more if stocks were rebounding and PM was falling, as they would be selling PM to buy the rising stocks.

I simply see investors scared of global growth, and are worried about deflationary pressures. Deflation would explain lower stocks, commodities, and other assets. Flight to currency. I hear the 10 year US bond has never had a higher price in its history.

 

Hedge funds... looks like margin calls, because they are generally leveraged to some extent.

Mutual Funds... Ever wonder why they call it a growth fund or a value fund yet have annual 70 to 100% portfolio turnover. Programmed trading.

High frequency crowd... essentially a second by second arbitrage, who could care less the direction of the market.

Everybody is trying to exit at the same time for legitimate reasons.

Just wish I was sitting on more cash to buy more large cap global titans.

 

The drop in silver would likely be due to either physical sales, which seems unlikely, or futures liquidations. If you want to replace the term "hedge fund" with "technical trading fund" or some similar term, that's okay with me. I tend to use the term hedge fund generically -- like kleenex. I don't know any of these guys personally, but from my reading I got the impression that the technical traders would buy and sell just about anything that moved and that they favored diversification among markets. So problems in one market would affect their liquidity in another.

 

I'm not ordinarily a big fan of the ZeroHedge site, but this closing paragraph from today's commentary caught my eye:

Well, as it turns out, there is one type of time-out in the globalized commodity marketplace -- the weekend. We have one coming up shortly. I'll be watching with GREAT interest when things start to re-open Sunday evening.

 

The Fast Money guys on CNBC said they were buying silver as it dipped into the high $29's today. Is $29.99 the bottom in this correction? Or is it heading a bit lower? Who knows! In any case, I am really suprised at this steep correction right in the heart of the bullish PM season of Sep-Nov. This sort of reminds me of Fall of 2008, when there was massive liquidation of EVERYTHING to raise cash $$$ in that financial crisis. We all remember that ... when Silver fell from $20 down to $9 an ounce ... $9 was a great buying opportunity at the time.

 

I have been kicking myself for a couple years now. Almost pulled the trigger when SLV hit $10ish...

I made out OK... but dang a 3 or 4 bagger would have been really nice.

 

My opinion:

Nothing in the world, from a few months ago, has changed to explain the sudden drop in PM's. In fact, things have only got worse. I would only say that some big players may be getting desperate and are being forced into dumping large amounts on to the market. This should be viewed as a buying opportunity and a chance for the little guy to get back in. To be able to buy silver under $50.00, is in my opinion, is a buy.
Until the worldwide banking crisis, housing crisis and unemployment gets resolved then I am still buying small amounts when I have the cash. From what I see, things are going to get a whole lot worse before they get better.
The current rush to the U.S. dollar is even more mind boggling than the downward trend of PM's.

 

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I don't disagree with this, and also much for gold. However, the reverse is also true ~ When the PM are booming upward, it is not the activity of physical either, it is the levered paper market. But the spot price will follow.

However, the biggest effect is that the fear factor has deserted PM for the USD, so they will come down. Several weeks ago, I said I felt there was a $250 fear factor in gold ( then at just below 1900 as I recall) and the Swiss franc was free and not pegged to the USD, so the US dollar was weaker than now. Once the Swiss franc was pegged to the Euro, the USD became the boss money. Feel sorry for Mexico , their Peso went from 11.7 to the USD on Aug. 1 to 13.7 today. Brazil, Russia, are also down about 20%.

Blame the down not on manipulation, but that the Asians and Europe didn't buy PM for safety rather than USD. Actually as a group of people they most likely are just trying to get cash for survival rather than buying the PMs. It is many times easier for most to get USD rather than PM.

I said this in post #7, and I still feel it is accurate as a caution, even though prices have fallen.

Jim

 

I've thought for a long time that too many people are convinced that G&S are a "sure thing". Can never go down (a lot), but will always go up. That PM are somehow immune to market cycles--in all different asset classes--that have occurred thru-out history.

4% or 10% down is very minor, when gold has gone up some 600% since 1999......I'd ask all PM investors buying in at current levels: How would you react if we go into a really bad (worse) recession, & PM go down 33%? 40%?

 

Andrew MaGuire has more than enough evidence on the Internet, which is the basis for this lawsuit for anyone who would like to research it. He called the manipulation prior to it happening, and then it happened the way he said it would. You're right the lawsuit itself isn't proof, but the proof is out there.

As far as the boogey man, well, call it what you like, but gold, silver, and copper margin hikes went into effect today. The price action we are seeing is not the result of free market forces.

http://www.zerohedge.com/news/case-closed-cme-hikes-gold-silver-copper-margins

I do not believe silver is the only thing being manipulated, but it's the only thing I have seen empirical evidence for.

Also, PM investing is not just commodity trading. Gold is widely accepted as an alternative currency and a hedge against inflation. This is nothing new, and these properties are unique to precious metals among commodities. To put precious metals in the same category as wheat or oil would be like putting dollars in the same category as printer paper.

 

Here's a link to some reasonable explanations as to why PMs are taking a such a beating. If you buy the main-stream media explanation, a correction was due anyways after the recent run-up.

This is a repeat post of one I listed on the "Silver Price Drop" thread in the bullion section today. But I think it is relevant to this thread as well. It's a quick read and gives some basic explanations to the big drop we've seen in the last couple of days in PMs.

http://www.cnbc.com/id/44632852

Read more: http://www.cointalk.com/t192351-3/#ixzz1YokwAEL7

 

The above MSNBC story really tells us how confused and nervous everyone has become.
It's like a game of musical chairs. Everyone walking in circles eyeing up the chair they are going to grab. The mass confusion being seen worldwide, is only another good reason to own PM's, regardless of price.

 

I heard that it was officially announced at 4:30pm today that gold and silver margins were raised significantly. I guess some people got advanced notice. :rollling: TC

 

Any commodity is a hedge to inflation, PM is not unique in that regard. Also, try walking into most gas stations, grocery stores etc and pay with a gold coin and see how far it gets you if you really believe its a "widely accepted alternative currency".

Btw, maybe the margin hikes went into effect BECAUSE of the market volatility, not the other way around. That is what usually happens.

Chris

 

I think margin hikes are good. I dont think people should be allowed to margin commodoties (any commodity). Let's flush out all the weak hands, let silver fall back to $20, then we can load up again for the next run.

 

So you think avocados will last long enough to be a hedge against inflation? I'm not really interested in storing 50 gallon drums of oil in my garage either. Maybe precious metals aren't widely accepted currency, but they're the only commodity with alternative currency status, whatever the capacity may be. I will cede that PM's aren't the only commodity that hedges against inflation though.

If you mean that the PM margin hikes decrease volatility in the rest of the market, not precious metals, then I must agree it was quite effective. However, for precious metals the response to margin hikes must be a drop in price because it requires more collateral to do the same amount of trading, and anybody who is already "all-in" has no choice but to sell in order to cover the new, larger gap unless they want to take out a loan.

 

I think the market has the right to stabilize itself. Maybe I am being goofy, but the last margin hike was volatility to the upside, it was imposed after a very fast upward move. Everyone here screamed manipulation. Well, this time they had equal volatility on the downward side, imposed margin hikes, and again everyone here screaming manipulation. So, I must conclude that PM investors here believe any margin change is by definition market manipulation. Is that right? You do not think the market has the right to tighten standards in the face of high volatility? They just proved by their last two actions it is not only one direction, but either direction in the face of high volatility.

Chris