woensdag 29 februari 2012

Silver Margin Requirements Hike: A Timeline

Today we had a pretty big decline in the price of silver and gold: almost a 7% decline. And by coincidence the timeline is precisely 5 months between each margin requirement hike.

The first big drop in the price of precious metals came on 02 May 2011.
The second big drop in the price of precious metals came on 23 September 2011 on top of another margin requirement hike and operation twist.
This time, something fishy is happening, but I can't tell what. Maybe another margin requirement hike?
Maybe because of Bernanke's testimony?

=> Bernanke Speech
=> Ron Paul at the Bernanke Testimony

The timing of course, is a pure coincidence. I'm wondering if they are trying to manipulate it down for a third time. We'll see...

Timeline of Margin Requirement Hikes in Silver/Gold (PSLV)

6 opmerkingen:

  1. Why wouldn't more stringent margin requirements be price neutral; after all, don't margin requirements affect both the shorts and the longs equally?

    1. Margin requirement increases affect longs in a bad way and shorts in a good way. Because people buy silver/gold on credit, if margin requirements go up, they are forced to sell their precious metal holdings which makes the silver price go down in the short term.

      Of course, in the long term it's a good thing for longs, because it will make the precious metal price more stable. And longs can buy more of it.

      Why would it be price neutral?

  2. "Why would it be price neutral?"

    Your question seems to imply that shorts don't use margin credit too; don't increased margin requirements force some shorts to cover as they force some longs to cover?

    1. Oh now I understand. The margin requirement hike applies to both long and short future accounts.

      If the silver price wasn't budging at all, then the silver price wouldn't go up or down when a margin hike occured.

      But when the silver price already went down 5% because of a weak market, and when the margins were hiked at the same time and another time some days later, then we would have a price plummet in silver, because the longs would have more margin calls to suffer.

      Thanks to point that out, I'm learning every day...

    2. Which takes me to the next question. If we already had so many longs covering due to margin calls. That leaves the shorts, who haven't covered yet.

      If the price of silver goes up and margin requirements are hiked up. Then we could see an explosion in silver prices.

    3. Yes! The very action that they claim to use to calm the markets down is what causes instability and wild price swings. It leads one to question their motives: If powerful banking insiders, like JPM, were being tipped off to impending margin changes, that would go a long way toward solving the mystery of the motivation of such irrational regulatory decisions.

      'Regulatory capture' is the rule and the very purpose of any kind of state regulations in the first place; all other rationalizations for 'need' for regulations being nothing more than ideological cover that obfuscates what it's really about: Corruption.

      The net effect is neutral, but all that whipsawing on the way to nowhere leaves the insiders with your money.