As written about here previously, the social media investment crowd on Reddit has its sights trained on silver. The precious metal bounced big Monday, in Asia, Europe and the United States.
Also as predicted here, the people in charge, who seem to have a mission to keep a lid on the public making investing profits (as opposed to banks and investment firms) have tried to stomp on silver just as they did with GameStop and other stocks that were flying on the strength of runs on the shorters – hedge funds and other assorted financial behemoths.
In the case of the silver, the CME Group has announced raising margins on Comex silver futures by 18 percent.
This supposedly was in response to the price action. Let’s see: Spot silver got as high as $29.55 Monday. The March Comex silvers future topped at 29.50. Notably, both were down considerably later in the day from those peaks.
Even at the peaks they were only about 60 percent of all-time highs. Do the people who run stock exchanges fall all over themselves to rein in a runaway Tesla stock. Or Google? Or Apple? Or Netflix?
Why no, no they do not.
They like it when their darlings run and the big institutions are profiting. They don’t like it when the big institutions have the small investor horning in on the big guys’ game.
Make no mistake, this increase in margin, which is the percentage of actual value that an investor must post to control a contract, is aimed, indirectly, at small investors
The regular silver contract on the Comex is 5,000 ounces, or at $30 an ounce, $150,000. Even the so-called “mini” contract is 1,000 ounces, or $30,000 total value at $30-an-ounce silver. No small investors here.
But the small investors buy their products, like the silver exchange traded fund SLV, based on silver futures prices. Similarly, silver mining stocks rise and fall based on futures prices.
Futures markets in the United States don’t open until Tuesday morning. But the precious metals did resume trading in China as early as 6 p.m. east coast time Monday evening and already the silver spot price is, according to Kitco.com, down 50 cents to $28.05 an ounce as I write this.
The good news for me is I’d sold much of my SLV in the premarket session of the New York Stock Exchange Monday, anticipating this sort of price capping. I didn’t get the top price, which came during the regular session, but close enough.
I did buy back a little SLV during the day, at a lower price, just to have a bit for trading purposes. It is, of course, down much more now.
Playing small ball and taking profits whenever they appear is a lesson precious metals investors should have learned through the years. The people behind the curtain are quick to act to take away the punch bowl when the riffraff are partaking, so cash in profits early.
Similarly, tales of GameStop multi-millionaires who ran small options positions into seven-figure profits will end badly if they get greedy and forget to sell to lock in those mammoth gains.
For latecomers to GameStop it’s even more likely to end badly for them – maybe already it has with that stock hitting the skids Monday.
But silver is a bit of a different issue in that it has a strong fundamental case beyond any short squeeze attempt.
It is more than a little possible that silver, even if its price declines for a time due to the market rules being invoked against it, will rise above those efforts and continue onward toward a rendezvous with the approximate $50-an-ounce all-time highs visited in 1980 and 2011.
I will be watching closely, looking for an opportunity to reload paper trading vehicles in any decline.
You would do well to note that regardless of how the paper price of silver is manipulated lower through futures, the actual cost of acquiring coins, rounds or bars, the sort of stuff that hurts if you drop it on your feet, will bear little resemblance to that futures price.
Already huge precious metals dealers are reporting having little or no product to sell. And if any of them do have product, the premiums – the amount investors must pay over the spot price – are large.
Adherents of gold and silver dream of the time when the physical market eventually over-runs what they believe to be fraudulent futures prices.
Grab some popcorn and watch the show.
Sam Ross Jr's site 