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Silver Prices - It's All About the Concentration

Commodities / Gold and Silver 2013 Aug 09, 2013 - 06:40 PM GMT

By: Dr_Jeff_Lewis

Commodities

Naked shorting of silver is not really the issue, as silver analyst, Ted Butler has been pointing out for decades, it is more about the extreme concentration of short silver positions and less about the big players being caught red-handed sending blatant signals of market price fixing collusion.

Also, forget about gold and silver being valued as commodities, since most people will agree that these metals both have a monetary demand associated with them.


The market seems like two loose wheels on an axel careening down miles and miles of "monetary hills". They are not fixed and tend to drift back and forth along the axel, and this determines the price. Different axels price different currencies.

The Silver Market Remains Unbalanced

It also seems that the lynchpin of institutional confidence that has been keeping these wheels from falling completely off their axel is weakening, but still holding. Market twists and turns also result because the wheels in this analogy are not balanced.

Envision the spokes of each wheel. Wheels are of equal diameter and thickness, and both wheels are equal in size, one short for every long. The spokes determine balance, and if they are equally spaced, then the wheel is balanced.

Each trading entity is entitled to a space or position allocation. Usually there is a limit, but not so for the gold and silver market.

If the spokes are considerably displaced, i.e. one trader has an oversized share on either side of the market, the wheel becomes unbalanced. This causes it to slide toward one side or another, thereby influencing the market price. This situation is dangerous and it risks the wheels coming completely off the axel.

Run by Computers

Trading is also algorithmically driven by allowing computers to participate in the market in huge size, and panics can occur in either direction.

Why not worry about naked traders? Well, the majority of speculators who purchase or sell futures contracts are not transacting real metal anyway. Nevertheless, this artificially determined futures price still seems to be passing for price discovery in the silver market.

Basically, the physical silver market never seems to correspond to futures prices. Ultimately, the physical market will wield greater influence — either on another exchange or after the paper futures exchanges lose all meaning and importance.

For more articles like this, and/or for a breath of fresh silver market reality amidst the stench of denial and technically meaningless short term price obsessed madness, check out http://www.silver-coin-investor.com

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com

    Copyright © 2013 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Dr. Jeff Lewis Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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