Silver – What on Earth Just Happened?

Silver – What on Earth Just Happened?

By: John Fisher  Silver – What on earth just happened?  The approximate $10 decline (from $41 to $31) in the silver price this week was very, very healthy!  It purged the weak hands, the excess and the speculators from the market. What remains are the true metals investors.

All of the selling has been paper selling.  Futures contract holders were decimated.  Margin positions on ETFs and mining stocks were wiped out.  Double and triple long funds such as ProShares were cleaned out.   And with the big drop in the broad market, investors indiscriminately hit the “sell” button for equities, bonds and commodities alike.

Paper silver investors were selling in droves.  The ETF buyer is nothing like the physical silver (or gold) buyer. Physical silver investors were buying in droves (at bargain prices I might add.)  This was quite simply a paper phenomenon, not a physical phenomenon.

We did not have one single client sell any of their physical metals.  In speaking with three of the largest wholesale distributors in the country, buyers outnumbered sellers 50:1.

In 2008, silver went from $20.68 to $8.80 (a 57.5% decline).  This was the result of that which is happening now – the paper speculators were purged from the market. Many people thought that the silver run was over and got out. After all of this occurred, the price promptly climbed from $8.80 to $49.  If we had known then what we know now, we would have all bought as much silver as we could possibly muster.

We are presented with the same tremendous buying opportunity today.

All Things Considered – John’s Commentary

Quote of the day:  “Gold and silver, like other commodities, have an intrinsic value, which is not arbitrary, but is dependent on their scarcity, the quantity of labour bestowed in procuring them, and the value of the capital employed in the mines which produce them.”  – David Ricardo