A Collapse in Silver

Over the six months, silver was a delight to own. That has changed in dramatic fashion over the last two weeks.

As you can see, the white metal has simply been pummeled since May 1, losing all of the value gained in the month of March in nearly a week.

So the question at hand is whether or not this is a temporary setback, or whether this is the official popping of the commodities bubble.

I believe that the scale of this decline is quite important. They say that sometimes things "take the stairs up and the elevators down." It certainly is the case here, several weeks of gains were wiped out in a single week. However, I think it's important to see that we did not loose a year of gains, but rather a month of gains.

In my opinion, this recent crash was simply the short squeeze from March & April coming to an and in grand fashion. I sold some in the run up, but should have sold more. Hindsight tells me I should have sold all of it, but as always hindsight was nowhere to be seen on May 1st. Thanks for nothing, hindsight.

This dramatic decline was encouraged by some extremely meaningful margin hikes by the CME. Margin requirements were nearly doubled in a week and this forced out a number of investors/speculators who were leveraged to the hilt. If the goal of the hikes was to lower the price, it was hugely effective as margin increase not only pushed out new positions but tripled or quadrupled the size of margin calls for anyone who initiated positions in the second half of April.

There is a lot to the story on silver. I will try and explain what I understand in future posts. But fundamentally, the two most important issues at hand are worldwide currency depreciation and the availability of physical silver.

Silver bounced off $33.00 pretty well this morning. Perhaps a bottom is in.

MONKEY BUSINESS:
Buying AGQ @ $159.70