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About Silver Market Manipulation

David S. writes:

Silver has been again taken down by a massive market manipulation orchestrated by CME and the big institutional shorts – read J.P. Morgan. Until the CFTC imposes meaningful position limit rules on silver futures contracts, the small precious metal investor will continue to be the whipping boy. I remain bullish on silver for the long run. Thank you for your timely bulletin.

Silver Market ManipulationHaving a long-term focus is key. If you are a short-term trader or hold a leveraged position, then the orchestrated take downs in the futures market can be devastating. On the other hand, if your aim is to accumulate silver over time, then volatility can be your friend!

When silver slips below its rising long-term moving average, it gives you an opportunity to buy at a lower price than would be possible if silver were to follow a smooth path upward. If, for example, you intend to hold until silver reaches triple digits and accumulate more along the way, then you are actually better served by sharp downdrafts than a steady rise to your price objective. When you can add to your position at a discounted price, you lower your overall cost basis and enjoy bigger profits when you finally decide to cash in.

Manipulation by leveraged players in the futures markets can only delay and/or slow the ascent in silver prices, as tightness in the physical market continues to drive prices higher over time.

What Size Gold Coins Should I Be Buying?

Terry V. writes:

What do you think are the best denominations of gold coins to hold and why? I understand the 1/2, 1/4, 1/10 oz. coins are more expensive, but then, could there be a need for the smaller denominations? And if at some point you decide to sell them, won't you get the same amount of gain as from the 1 oz. coin?

Fractional-ounce coins aren't usually the most cost-effective way to own gold. For example, 10 tenth-ounce coins would cost more than a one-ounce coin. (That said, you may be able to sell back the 10 tenth-ounce coins to a dealer for more than the single-ounce coin.) In percentage terms, premiums on the fractional are unlikely to increase more rapidly than the gold price itself – a dynamic that militates in favor of holding one ouncers or even lower-premium items such as bars.

But there are good reasons to own smaller denominations. They are certainly attractive if you aren't able or don't want to buy a full ounce of gold at a time. They can also be useful potentially for gifting, barter and trade, or for holding in travel or bug-out kits.


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