Tuesday, June 10, 2014

Dirty Tricks In the Silver Market

I started paying attention to silver prices about five years ago now, and bought my first silver in 2010 just as the price was hitting $30 an ounce, on it's way to a high of a splash beneath $50.00. Blogs and websites sprung up speculating daily about price manipulation and speculating silver would easily rise to $100 an ounce if some shadowy entity were not manipulating the market. And they had some convincing arguments, the most persuasive to me being that JP Morgan and other manipulators simply didn't have enough silver in its vaults to cover demand if everyone wanted their silver at the same time.
Then the price crashed. Quickly. Maybe it was slower than I remember.  For the most part I sold the silver I had bought between 30-40 at 30-40 on the way down. I ended up even Steven. But that's not exactly why I bought it in the first place. I wanted to make money. I wanted to buy an asset that would be worth more money when I sold it than when I bought it. 
So, what did I do wrong, and what would I do differently if I did it again?
The answer is so deceptively simple it evades most people. Buy it low, sell it high. The thing that happened in this latest silver rush was no one wanted to sell high. We were all high on the almost narcotic effect of having the asset that is hot. What we forgot was that if you don't sell the asset that is hot when other people want to buy it, you can't make money. 
This very week silver has been as easy to buy at around 20-22 an ounce as it has been in years. It's not that much fun to buy an asset at a low because there's no immediate gratification. You put it with the others and wait. 
Is JP Morgan manipulating the price of silver? Hell if I know. Seems unusual to me that they wouldn't, considering that's their business. You probably would, too. I wonder if in the future, though, if it won't be in their best interest to inflate the price of silver to some insane number. Quickly. And if they do that, this exact moment would have been the time you needed to buy all the silver you could to make money later. Volatility has been flatlined for a couple of years now. The one factor I see that makes me believe there won't be any real rocket ride in silver prices anytime soon is that now everyone has it. The low prices haven't done much to get silver out of the hands of all those people who bought it these past five years, and if you have it they have no real motivation to make it valuable again. 
So, what would a reasonable expectation for silver be in the next five years?
I don't see it above $50. I don't think it's in any of the power broker's interest to allow it to rise above that level. I think there will be one more climb to fifty in the next two years. Probably a very rapid one. One so rapid that if you don't already have it you won't be able to take advantage. 
Now, if that flash of upward volatility were successful in shaking the silver out of the hands of a lot of people who have too much for their own damn good, then i could see a later run, perhaps in the next five years, that might approach $100. But don't feel bad if you take advantage of the chance to sell at $50. 
Go buy now. 

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