An interesting thing happened Tuesday morning. Both silver and gold dropped overnight in international trading, attributed to a return of investor confidence. Nothing unusual, either in the size of the moves, the direction or the reasoning.
From a start of about 1.7% down, silver dropped another 2% over the next 3-and-a-half hours. During US normal trading hours.
Now we’ve talked about the possibility that someone or someone’s are trying to hold down precious metals prices before. It’s an old story, even to these grizzled ears. And there is the argument that the silver market is much smaller in currency terms (think:size in US Dollars) than many other markets, making it ripe for short-term manipulation. (Remember the Hunt brothers?)
Gold, on the other hand, behaved more normally, dropping about 1% during the same time period. Can silver really be 4x as volatile as gold in a 4- or 12-hour span?
This latest drop really has the feel of an intentional smackdown. Silver longs weren’t THAT long, at least according to the last COT report. So to hammer silver down almost 4% in less than one day sounds like somebody is ringing the shorting bell on silver. Who, we don’t know; there are no proven cases of market manipulation by traders, and maybe someone has found a new way to accomplish the same thing.
It just doesn’t feel like a normal down-move. There isn’t any panic in the markets; no one had really rushed to fill up their pockets with enough silver in the prior month to justify such a price-drubbing.
It will be interesting to see what comes to light in the next few weeks and months about this. It could be nothing, but we suspect something’s afoot.
The Gold Enthusiast
DISCLAIMER: The author holds no position in any mentioned security. The author is long the silver sector via a small position in USLV. He may daytrade around this position but has no intention of trading out of this core position in the next 48 hours.
The iShares Silver Trust (SLV) was trading at $16.68 per share on Thursday morning, up $0.27 (+1.65%). Year-to-date, SLV has gained 4.32%, versus a 22.43% rise in the benchmark S&P 500 index during the same period.
About the Author: Mike Hammer
For 30-plus years, Mike Hammer has been an ardent follower, and often-times trader, of gold and silver. With his own money, he began trading in ‘86 and has seen the market at its highest highs and lowest lows, which includes the Black Monday Crash in ‘87, the Crash of ‘08, and the Flash Crash of 2010. Throughout all of this, he’s been on the great side of winning, and sometimes, the hard side of losing. For the past eight years, he’s mentored others about the fine art of trading stocks and ETFs at the Adam Mesh Trading Group.