Misjudged on Silver


"Silver shorts repent. . ."

Traders across the world who expected silver to fall on a correction are in for disappointment again.

The prices are just refusing to budge and the short position thousands of traders are holding is gradually melting into thin air, resulting into huge losses.

The villain in the piece in this story is investor's unprecedented trust in gold and a complete mistrust in silver. As a poor cousin of gold, silver always played a silent part in the sibling rivalry. It was time, the white metal paid in its own backyard.

Silver jumped and nearly reached an all-time high of Rs 64,000/kg. putting sell positions to shame—so much so that though gold also hit its all-time high, its strength is hardly noticed. No other commodities have rise 10 times in the last decade and 80% of this rise in the past one year alone.

Silver's phenomenal growth has left many wondering why they didn't choose silver over gold. At the same time, getting into short also means they expect silver to perform poorly.

In November 2010, JP Morgan and HSBC Securities faced charges of manipulating the market for silver futures and options in violation of federal commodities and racketeering laws. A lawsuit was filed then in the U.S. District Court for the Southern District of New York.

Both the behemoths were alleged to have combined to manipulate the silver futures in the first half of 2008 by amassing huge short positions in silver futures contracts they had no intent to fill, but did so to force silver prices down to their benefit.

Situation is no different now but is headed to, perhaps, a different angle. If silver continues to go where it is traveling now, there will be much heartbreak.

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