February 29, 2012
BY: Robert Hallberg, Topics: Silver
Today we witnessed what appeared to be another raid in the precious metals market. Gold and silver had started to generate some momentum, and were breaking out of their trading range.
Then, massive selling started to take hold at exactly 10:00 am EST, coinciding with the Fed's release of its monetary policy statement to the House Financial Services Committee. 225 million ounces of paper silver was dumped into the market within a 30 minute timeframe. To get an idea for the amount of paper silver being sold; 225 million ounces represents almost one third of annual production. The charts bellow shows the action in the gold and silver market.
Gold Chart:
Last year we saw a trend away from paper derivatives and a drift towards physical metal. But the paper market is still much larger than the physical market and it still determines the price. But the march towards irrelevance is already underway in the paper market and events like today and the fiasco with MF Global only serve to accelerate this trend.
But was the smash in the metals today really a setback or an opportunity? If you study the fundamentals and look at the long-term trend of these markets you probably see this as an opportunity rather than a setback and use this occasion to purchase more metal at lower prices.
The irony is that while we have massive selling in the paper market, we typically see an increase in physical buying. Bill Murphy of GATA said in an interview with Kitco today that both the Chinese and the Russians typically step up to the plate and purchase physical products on days like these.
To learn about trends and spot the next investment opportunity read the Casey Report from Casey Research. It's a monthly investment news letter that breakdown economic trends in a way that is easy to understand. They make recommendations based on economic reality and their track record is several times better than the market or any mutual fund for that matter.
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