April 11, 2026

Silver Prices Higher After Latest COMEX Margin Increase

May 10, 2011 by 3 Comments

Despite the trepidation by some investors of further price declines, silver bounded higher, even as the fifth recent increase in silver margin futures by the COMEX took affect.  As measured by the London Fix Price, silver closed at $38.00 on Monday, up from $34.20 on Friday.  The impact of the higher COMEX margin requirements had clearly been discounted after being announced last Wednesday.

The COMEX had roiled the silver market last week with a rapid fire series of five hikes in initial margin requirements for trading silver futures (see How The COMEX Crashed The Silver Market).  The actions of the COMEX, combined with a short term overbought market, caused a sell off that sent silver prices plunging by a shocking 26% on the week.  The five margin increases by the COMEX increased initial margin requirements by a substantial 84%.   Thinly capitalized players were forced to liquidate positions driving silver prices lower, causing further forced selling as additional traders liquidated positions to avoid losses and margin calls.

The large increase in margin requirements was highly disruptive to the market and had a dramatic adverse impact on prices.  The mainstream media quickly characterized the drop in silver prices as proof that a speculative bubble had ended and predicted further declines in the price of gold and silver.

However, none of the fundamental forces driving the rise in the price of silver have changed. The forced liquidations of leveraged silver futures traders can be viewed as a positive.  The recent rout likely had the impact of moving positions from weak hands to long term investors willing to ride out the inevitable pullbacks seen in every bull market.

Filed Under: Featured, Silver

Precious Metals Prices Stumble In Wild Trading Week

May 8, 2011 by 1 Comment

Commodity and precious metal prices tumbled this week, with gold and silver prices snapping a streak of four consecutive weekly increases. Following the recent run up in prices, there had been some anticipation of a correction. In addition, there were concerns that the Fed’s announcement of the end of QE2 would result in an end to the flood of cheap money which has fueled the rise of commodities.

In the precious metals group, silver was the biggest loser with a drop of almost 30% from last Thursday’s closing London PM Fix Price.  (The London markets were closed on Friday, April 28th.)  The losses in silver far outpaced the declines in other precious metals and many place the blame squarely on the rapid fire multiple margin increases by the COMEX for trading silver futures (See How The COMEX Crashed The Silver Market).

Gold, platinum and palladium also had a tough week with respective price declines of 3.19%, 2.51% and 7.21%.

Precious Metals Prices
PM Fix Since Last Recap
Gold $1,486.50 -49.00 (-3.19%)
Silver $34.20 -14.50(-29.77%)
Platinum $1,789.00 -46.00 (-2.51%)
Palladium $721.00 -56.00 (-7.21%)

Precious metals have had previous serious declines without affecting the long term upward move in prices (see Measuring Declines From The High For Gold and Silver).  Overextended markets will correct but the fundamental forces pushing precious metal prices higher have not changed.  While dollars and other paper currencies can be produced in infinite quantity, the supply of gold, silver and commodities are finite.

Despite the Fed’s promise to stop printing money and its pledge of supporting a “strong dollar”, the dollar has had only a feeble recovery and is close to its all time lows.  The markets clearly have no confidence in Chairman Bernanke’s words and the weak dollar proves it.  Every bull market experiences temporary pullbacks and the precious metals are no exception.  Long term investors should view the latest price consolidation as another potential opportunity to increase positions.

Filed Under: Weekly Recap Tagged With: , , , , , , ,

How the COMEX Crashed the Silver Market

May 6, 2011 by 14 Comments

By the close of trading on Wednesday, May 4th, the silver market had experienced significant selling pressure that drove prices down by 17.3% from Thursday, April 28th.  This sell off corresponded exactly to a series of increased margin requirements by the COMEX  for trading silver futures contracts.

Silver traders who may have been apprehensive about additional margin increases did not have long to wait.  After the close on Wednesday, May 4th, the COMEX announced two huge additional hikes in silver margin, effective at the close of business on Thursday and another hike effective at the close of trading on Monday, May 9th. As of Monday, initial contract margin requirements would be increased to $21,600 and to $16,000 for hedgers.  A year ago, when silver was trading in the $18 range, the margin requirement for a speculative contract was only $4,250.

The rapid series of five margin increases by the COMEX resulted in raising initial margin requirements for speculators from $11,745 to $21,600 – an increase of 84%.    The margin requirements for hedgers also increased by 84% from $8,700 to $16,000.   Silver futures traders would now be forced to come up with huge amounts of additional cash or liquidate holdings on price weakness.   The collapse in silver prices on Thursday May 5th, triggered by the COMEX margin increases, indicates that many players were forced to liquidate positions.

The actions taken by the COMEX constitute a perfect text book example on how to crash a market. The non stop increases in margin requirements resulted in a dramatic reduction of liquidity in the silver market by forcing out small speculators who were not prepared to commit additional cash for margin maintenance.  As prices fell in response to the COMEX margin increases, bigger players in the silver market were forced to liquidate positions to avoid margin calls and large losses on leveraged positions.

The last two margin increases by the COMEX, after silver had already declined by over 17%, created the perfect crash scenario.   Silver traders liquidating positions to meet new margin requirements caused a further cascade of forced selling and the silver crash became inevitable. The elimination of liquidity from any market will result in falling prices and the COMEX knew this.

If someone wanted to crash the silver market, the moves taken by the COMEX were perfectly designed to accomplish this by reducing liquidity at a time during which the markets were already stressed from previous margin increases. The result was a collapse in silver prices from $48.70 to the $34 range.

In response to the outrage over the devastating series of margin requirement increases, Kim Taylor, President of CME Clearing, which owns the COMEX, issued a statement explaining CME’s actions. According to Ms. Taylor, margin increases are related to risk management and done to prevent default by clearing member firms.  Margins are adjusted based on market volatility and are not designed to move a market or discourage investor participation.  Among the factors considered in setting margins is a CME calculation of a worst case scenario for possible portfolio losses.

Specifically regarding the margin increases on silver futures, Taylor stated that “we have made several changes in recent weeks to adjust to volatility in the marketplace…Our interest is in providing security for the entire market – no matter which way it moves”.

CME’s statement seems disingenuous at best.  The protection they speak of is not for the benefit of investors, but rather for the benefit of CME and clearing house members.  The actions of the COMEX in implementing a rapid series of margin increases, even after silver had already steeply sold off, resulted in large profits to short sellers and reduced risk for CME at the expense of huge losses for silver investors both large and small.

A slower series of margin increases would have seemed more appropriate to address price volatility.  The CME knew or should have known that its actions would severely limit liquidity in the silver market.   The decrease in liquidity caused further market volatility, requiring more margin increases, which in turn crashed the price of silver. Anyone looking into the great silver crash of 2011, can start by looking at the COMEX.

Filed Under: Featured, Silver Tagged With: , , , , ,

Measuring Declines from the High for Gold and Silver Prices

May 5, 2011 by 1 Comment

The prices of gold and silver had each risen to fresh all time highs, just before the severe declines experienced over the past few days.

On April 25, 2011, the price of silver touched an intraday high of $49.82 per ounce. This narrowly eclipsed the previous all time high of $49.45 reached in 1980. Silver’s recent price of $34.64 represents a decline of $15.18 or 30.47%.

After breaking above the $1,450 per ounce level in early April, the price of gold had achieved a string of new all time highs. This culminated with the most recent high of $1,577.40 per ounce reached on May 2, 2011. The recent gold price of $1,473.60 per ounce represents a decline of $103.80 or 6.58%.

The severity of the decline for silver has drastically altered the Gold Silver Ratio. This ratio measures the number of ounces of silver necessary to purchase one ounce of gold. At their respective highs, the ratio would have been 31.65. Recent prices put the ratio at 42.54.

Gold

Recent High: $1,577.40 (May 2, 2011)
Recent Price: $1,473.60 (May 5, 2011)
Decline: -$103.80 (-6.58%)

Silver

Recent High: $49.82 (April 25, 2011)
Recent Price: $34.64 (May 5, 2011)
Decline: -$15.18 (-30.47%)

Gold and silver’s stellar performance over the past several years has been interrupted by other declines, some of them even more drastic. From intermediary peaks reached in March 2008, gold and silver fell sharply as the financial world melted down later that year. Gold fell from $1,011.25 to $712.50 per ounce, losing 29.54%. Silver fell from $20.92 per ounce to $8.88, for a loss of 57.55%.

Despite the recent carnage, both gold and silver hold onto gains for the year to date. From the price levels on December 31, 2010, gold is up $63.35 per ounce or 4.49% and silver is up $4.01 per ounce of 13.09%.

Filed Under: Featured, Gold, Silver Tagged With: , , , ,

Silver ETF Holdings Plunge As Market Selloff Continues, Gold ETF Holdings Show Small Decline

May 5, 2011 by Leave a Comment

The amount of silver held by the iShares Silver Trust (SLV) plunged over the past week as the silver market experienced a major sell off.

Holdings of the SLV declined by 665.94 tonnes on the week.  To appreciate the magnitude of this decline, consider that the total silver  holdings of the SLV at its inception in April 2006 was 653.17 tonnes.  In addition to this week’s reduction in silver holdings, the SLV saw a drop of 130.49 tonnes in the prior week.

Holdings of the SLV had recently hit a record high of 11,390.06 tonnes on Monday April 25 as prices soared towards all time highs near $50 per ounce.  Silver held by the SLV Trust has declined by 1,002.8 tonnes or 8.8% from the record high, bringing holdings back to the levels reached on February 10th of this year.

The SLV currently holds a total of 334 million ounces of silver valued at $13.5 billion.  After recently reaching a high of $48.35 the SLV sold off sharply, closing yesterday at $38.27.  The SLV has declined by 21% from its all time high reached five trading days ago on April 28th.

GLD and SLV Holdings (metric tonnes)

May 4-2011 Weekly Change YTD Change
GLD 1,219.94 -9.70 -60.78
SLV 10,387.26 -665.94 -534.31

A multitude of factors, both fundamental and technical were cited for the sharp decline in silver prices including:

  • Five margin increases on silver futures contracts, including two new ones announced on May 4th by the COMEX.
  • Liquidation of silver holdings by a hedge fund run by George Soros.
  • Excessive speculation in silver as indicated by huge volume in SLV trading.
  • Manipulation of the gold and silver markets by large players with short positions..
  • A very overbought market described by some as a “religious fervor” for silver.
  • Profit taking at the technically significant level of $50 per ounce, last reached in 1980.
  • The end of QE2 announced by the Fed last week.
  • Huge record volume in silver futures trading.

In any event, silver has become significantly cheaper in the past week and the fundamental reasons for owning precious metals remain intact (see Why There Is No Upside Limit For Gold and Silver Prices).  Long term investors should welcome the shakeout of day traders and speculators from the silver market and view this as a buying opportunity.

Holdings of gold by the SPDR Gold Shares Trust (GLD) declined modestly by 9.7 tonnes.  Current gold holdings of the GLD amount to 39.2 million ounces valued at $60.4 billion.

The inability of politicians to seriously address the budget deficit and ballooning national debt provide a compelling reason to diversity out of the U.S. dollar and into precious metals.   The dollar is close to all time lows as numerous countries announce their intention to diversify out of dollars to protect their wealth.  The disclosure that Mexico had significantly increased its gold reserves this year highlights the flight from paper currencies.  Based on the fundamentals, long term investors should view a correction in precious metal prices as an opportunity to add to positions.

Filed Under: Featured, Statistics Tagged With: , , , , ,

US Mint Gold and Silver Bullion Coin Sales By Month

May 4, 2011 by Leave a Comment

Through the end of April, the United States Mint has now sold 466,000 ounces of gold and 16,375,000 ounces of silver through its bullion coin programs. In both cases the figures are far ahead of the numbers from the comparable year ago period, despite the higher market price per ounce for the bullion.

Last year through the end of April, US Mint gold bullion sales were 388,000 troy ounces, while the price of gold ranged from a low of $1,058.00 to a high of $1,179.25 per ounce. Silver bullion sales during this period were 11,531,000 with the market price ranging from a low of $15.14 to a high of $18.84 per ounce.

US Mint Gold and Silver Bullion Sales (in ounces)

January February March April Total
American Gold Eagle 133,500 92,500 73,500 108,000 407,500
American Gold Buffalo – – 38,000 20,500 58,500
Total Gold in ounces 133,500 92,500 111,500 128,500 466,000
American Silver Eagle 6,422,000 3,240,000 2,767,000 2,819,000 15,248,000
ATB Silver – – – 1,127,000 1,127,000
Total Silver in ounces 6,422,000 3,240,000 2,767,000 3,946,000 16,375,000

During the latest month of April 2011, the US Mint recorded sales of 128,500 troy ounces of gold bullion, comprised of 108,000 ounces worth of American Gold Eagles and 20,500 ounces worth of American Gold Buffaloes.

Meanwhile, silver bullion sales for the latest month reached 3,946,000 ounces, the second highest level of the year. For three months running, the pace of sales for the American Silver Eagles had remained approximately the same base level, despite indications of higher demand. The restrained sales are presumably the impact of the US Mint’s allocation program, which rations the available number of bullion coins amongst the authorized purchasers.

The boost in silver bullion sales seen in April was due to the release of the 2011-dated America the Beautiful Silver Bullion Coins. These coins each contain five troy ounces of silver and have a diameter of 3 inches. Sales began on April 25, 2011, and authorized purchasers immediately purchased coins accounting for 1,127,000 troy ounces of silver.

Filed Under: Gold, Silver, Statistics Tagged With: , , , , , ,

COMEX Increases Silver Margin Requirements for Third Time in Past Week

May 4, 2011 by 3 Comments

On Tuesday, May 3rd, the COMEX raised margin requirements for trading silver futures contracts. This was the third increase in the past week.

The new margin requirement per contract was increased from $14,513 to $16,200 for initial margin and from $10,750 to $12,000 for maintenance margin.  Hedgers in silver futures pay maintenance margin as initial margin while traders are required to post the higher initial margin amounts.

Effective last Friday, the COMEX had also increased initial margin from $12,825 to $14,513 and from $9,500 to $10,750 for maintenance deposits.

Two days prior to this, the COMEX had also raised margin requirements. On April 27th, margin for initial contracts were increased from $11,745 to $12,825 and margin for maintenance contracts was increased from $8,700 to $9,500.

The CME Group, which owns the COMEX, has been raising margin requirements in an attempt to reduce volatility and protect itself from potential losses generated by large price moves.  As recently as early February the initial margin requirement per silver contract was only $6,075.

Although margin requirements have been raised significantly, the margin required as a percentage of total contract value has remained within a relatively narrow range of between 6 and 8 percent.   The increase in COMEX margin requirements have merely tracked the increase in the price of silver.

Under current margin requirements, a price decline of 8% could wipe out the margin of a silver trader leaving the COMEX exposed to potential losses if the trader does not come up with additional cash.  As silver prices have climbed almost nonstop, the COMEX has raised margin requirements ten times over the past year in order to maintain the same percentage of margin to the silver value represented by one contract.

Even with the higher margin requirements, silver futures contracts allow a trader to make a highly leveraged investment.  One silver futures contract is for 5,000 ounces worth $218,050 at yesterday’s closing London Fix Price.  The new higher margin requirement of $16,200 represents only 7.43% of the value of  one silver futures contract.

After trading close to the $50 per ounce level late last week, silver closed Tuesday at $41.72 in New York trading for a loss of over $8 or 16% over the past two days.

Filed Under: Featured, Silver Tagged With: , , , , , ,

Silver Institute Details Silver Demand and Supply Fundamentals

May 3, 2011 by 6 Comments

According to the  just released World Silver Survey published by the Silver Institute, global investment and fabrication demand were the primary factors that pushed silver prices higher in 2010.  Of major note among the many statistics released by the Institute, is the fact that despite rising prices and increased demand, mine production of silver rose by only 2.5% during 2010.

The Silver Institute survey showed increased demand during 2010 despite a 38% average increase in the price of silver to $20.19.   The increase in silver prices during 2010 was the largest price gain since 1980.

Silver investment, one of the largest categories of silver demand, rose by 40% during 2010 to 279.3 million ounces, almost double the amount for 2009.

The amount of silver held by silver ETFs rose to 582.6 million ounces during 2010, an increase of 114.9 million ounces over 2009.  The largest increase in silver holdings was by the iShares Silver Trust (SLV) which accounted for 40% of the total increase.

Demand for physical silver reached new milestones in 2010.  Silver used in coin and medal production rose by 28% to 101.3 million ounces.  Sales of  U.S. Silver Eagles reached 34.6 million, far ahead of the previous record of 29 million reached in 2009.   Sales of bullion coins by mints in Australia and Canada also hit new highs.  Investors also purchased 55.6 million ounces of silver in the form of bullion bars during 2010.

Silver fabrication demand hit a ten year high of 878.8 million ounces, an increase of almost 13% over 2010.  Industrial applications increased by almost 21% to 487.4 million ounces.  Jewelry increased by 5%, showing the biggest increase in demand since 2003.  Photography was the only category that experienced a decline with usage falling by 6.6 million ounces.

The Silver Institute notes that demand for silver in industrial application is particularly strong in electronics and thermal applications.  New industrial applications using silver are expected to account for an additional 40 million ounces of demand by 2015.    Silver’s unique chemical properties are constantly leading to new industrial demand, one example being the development of products using silver as an antibacterial agent.

The increased demand for silver has encouraged new mine exploration and production.  Nonetheless, despite efforts by mining companies, silver production increased by a very modest 2.5% during 2010 to 753.9 million ounces.  The largest silver producer in 2010 was Mexico, followed by Peru, China, Australia and Chile.

Silver from above ground stocks increased to 142.9 million ounces due to a 14% higher scrap supply, net producer hedging and a significant increase in sales from government stocks to 44.8 million ounces.  The primary seller of government silver stocks was Russia.

Silver has had a recent pullback after extraordinary gains over the previous two years.   Some experts see a buying opportunity.   Michael Haynes, CEO of AMPEX, one of the country’s largest precious metals dealers, commented on the silver pullback in an interview with CNBC.  According to Mr. Haynes “The Middle America, the individual investor across the world is just now beginning to take hold of this concept and they’re not day traders. They’re not looking to buy today and sell this afternoon, sell next week. They have a long time frame; 3 to 5 years. So they’re purchasing this asset, not because they want to make money today, but they are looking at it almost like an insurance policy or a hedge against the rest of their portfolio.”

Filed Under: Silver Tagged With: , , ,

As Gold Hits Record Highs, Perth Mint Finds Success in Smaller Sized Coins

May 2, 2011 by Leave a Comment

As the price of gold continues to climb, the cost of purchasing a one ounce gold bullion coin is approaching $1,600.  In order to provide the opportunity to own gold within a more reasonable price range, innovative mints have begun offering smaller sized gold coins.   In April 2010, the Perth Mint of Australia introduced a half gram 99.99% pure gold coin named the Mini Roo.

Struck with a fineness of .9999, each Mini Roo contains 0.016 troy ounces of gold. The coins have a diameter of 11.60 mm and thickness of 0.70 mm. By comparison, the one ounce Australian Gold Kangaroo has a diameter of 32.60 mm and thickness of 2.80 mm. The half gram Mini Roo and 1 oz. Gold Kangaroo are shown side by side in the image below.

According to the Perth Mint’s website, the Mini Roo is currently priced at $54.18. A major precious metals dealer’s website currently quotes the price of a single one ounce 2011 Gold Kangaroo at $1,668.23.

Alexandra Lucchesi of the Perth Mint Public Relations Department was kind enough to some insights on the objectives and sales levels of the diminutive gold coins.

Gold and Silver Blog:  Can you provide us with any indication of the sales levels of the Mini Roo half gram gold coin and how it compares to the sale of one ounce coins?

Alexandra:  To compare sales of the Mini Roo and 1oz gold bullion coins would not be a valid comparison.  The issues vary considerably in weight and price, and therefore, do not encompass the interest of the same individual and institutional investors.  Furthermore, the Mini Roo is targeted more toward collectors and gift buyers, whereas the gold coins of the Australian Kangaroo and Lunar series are directed more toward investors.

Gold and Silver Blog:  Has the half gram gold coin met sales expectations and have sales increased as the price of gold has climbed?

Alexandra:  The release of the Mini Roo has met our objectives at both wholesale and retail levels, with sales exceeding more than 15,000 2010-dated coins to date since being released in April last year.  With the 2011 coin only just released a fortnight ago [April 5, 2011], we can not yet estimate sales for the remainder of the year, although, with periodic prompted promotion, we are also anticipating favourable sales of this issue.

Gold and Silver Blog:  Will the Mini Roo become a regular annual issue?

Alex:  A Mini Roo was first introduced to the market in April 2010.  Complementing the world renowned Australian Kangaroo gold bullion coin series, the Mini Roo is expected to be released each year and will continue to portray the identical design as, or a simplified version of, the iconic Australian Kangaroo annual issues.

Gold and Silver Blog:  I would suspect that the much lower cost of the Mini Roo allows greater participation by investors and collectors as well as placing the Mini Roo within the affordable gift category.  Was the higher price of gold the determining factor in deciding to produce the half gram coin?  Have the offerings of smaller sized gold coins resulted in an increased number of new customers?

Alexandra:  That is correct.  The Perth Mint introduced the Mini Roo to encourage a broader audience to start investing in, or collecting, precious metal coin products.  In addition, the smaller coin was perfect to capture the interest of those who, traditionally, were unable to afford the classic Australian Kangaroo bullion coin sizes.  The timing for the initiative was also enhanced by the rising price of gold.  The lower price point of the button-sized Mini Roo does give individual precious metal investors, coin collectors and gift buyers the opportunity to purchase a pure gold coin at an affordable price featuring a similar design as its traditional counterpart.


The Perth Mint Australia

Filed Under: Featured, Gold, Perth Mint Tagged With: , , , , ,

Precious Metals Soar – Thank You Ben Bernanke

April 29, 2011 by Leave a Comment

As predicted on Monday, the Federal Reserve policy meeting and subsequent press conference by Fed Chief Ben Bernanke had the potential to cause an explosive move up in the precious metal markets. (see Federal Reserve May Cause Stampede Into Gold and Silver This Week)

At the conclusion of the Bernanke press conference it became clear that the Fed would maintain its policies of cheap credit and debasement of the dollar.  Subsequent economic reports showed a slowing economy, rising food and energy prices and a slowdown in consumer spending.  This was all the markets needed to hear and precious metal prices exploded upwards on the week.

Silver reached an all time high of $49.75 on Monday before pulling back on Tuesday to $44.60 and then resuming its upward streak after the Bernanke press conference.  The closing London PM Fix Price for silver settled at $48.70 on Thursday.  The London markets were closed on Friday, but in New York spot trading silver ended the week at $48.00, up from last week’s close at  $46.26.

Precious Metals Prices
Thurs PM Fix Since Last Recap
Gold $1,535.50 +31.50 (+2.09%)
Silver $48.70 +2.44(+5.27%)
Platinum $1,835.00 +23.00 (+1.27%)
Palladium $777.00 +12.00 (+1.57%)

As measured by the London PM Fix Price, gold closed Thursday at $1,535.50.  London markets were closed on Friday, but in New York trading, gold ended the day at $1,566.70, soaring $29.90.   From last week’s London Fix Price close of $1,504.00, gold exploded upwards for a gain of $62.70.

As precious metal investors racked up huge gains on the week, many were probably thinking of sending a thank you note to Ben Bernanke.  The reality is different.  Most investors, no matter how bullish they may be on precious metals, are probably diversified and do not have a 100% portfolio allocation to gold and silver.

Investor gains on precious metals, while helping to preserve wealth, may have only partially offset the wealth destruction caused by zero interest rates and falling home prices.  The majority of Americans have the bulk of their wealth tied up in their personal residence and bank accounts and  have seen major declines in their home equity and close to a zero return on savings.  Fed policies are driving more and more investors into the precious metals markets and soaring prices are proof of that.

As noted the London markets were closed on Friday, April 29.  Precious metals prices soared on Friday in New York trading with gold ending at $1,566.70, silver at $48.00, platinum at $1878.00 and palladium at $777.00.

Filed Under: Featured, Weekly Recap Tagged With: , , , , , ,