Silver: A War Between Average Folks And Big Money

First, I would like to apologize to my readers one more time for disappearing for a few days. As I posted before, my wife gave birth to our first child, a beautiful baby boy.

Now it’s time to get down to business and we need to look at silvers fall last week. I will show you how this was a desperate attempt by big money to artificially drive down the price of silver because they were getting killed by being leveraged way to short.

I know that a majority of my readers are middle class folks that invest in silver by taking physical possession. This is actually a very smart thing because the investors playing with silver electronically are going to have nothing to hold in their hands when world currencies begin to implode.

However, all silver investors should know the basics of silver futures contracts because it affects the price of your silver tremendously in the short run. By understanding the futures market, you will be less prone to being spooked when the “bubble burst” talk begins to fly.

Investors can bet on the future spot price of a very large quantity of silver by making a comparatively small investment. For example, two weeks ago I could have placed a bet with about $13,000 that would have yielded me a return of $50 for ever 1 cent that silver went up. I know this sounds tempting, but please don’t screw around with futures contracts if you’re an amateur because you can end up losing a heck of a lot more than your initial investment.

Big money has been betting against silver at ratios of around 100 to 1. Silvers rise was causing them to lose tons of money for each cent silver went up. So what did big money do? It changed the rules in the middle of the game. Essentially, it would be like the losing football team adding an extra quarter in hopes their team could catch up.

The CME (the guys who take the futures bets), increased the amount of money needed to purchase futures contracts in silver 5 times in less than two weeks. This is known as increasing the margins and it screwed small time investors.

This move was referred to a “atypical” by many market analysts and the stench of manipulation was in the air. Five margin increases is ridiculous and there should be an investigation here. The CME basically drove out everyone but the super rich guys who had been betting down and loosing so that they would not loose everything.

Today is the start of a new week and silver is headed up again. Just like the failure of market manipulation to save the housing market, I feel as if manipulation always blows up in the face of those perpetrating it. As long as normal folks around the world do not feel safe in phony paper money that is backed by nothing more than a promissory note, I think silver is going to be just fine.