There was steep decline in both gold and silver yesterday. I noticed this because people from the CNBC were screaming about significant decline in both gold and silver price by saying "It is time to get out of gold and silver market", while I am running in the gym. Again, I am sure that some people think what the hell is going on. In this short blog, I would like to explain what happened in silver market yesterday.
Although people from CNBC reported that reason for price decline in gold and silver is because it is less likely that Fed will announce QE3, it is not the direct reason for price decline far from this. What happened in the silver market yesterday is that over 120,000 contracts equivalent to 637 million oz of paper silver were sold at the market within a hour time. Think about this for a moment. Annual production of silver market is currently 800 million oz and 637 million oz of paper silver were dumped within a hour. This is nearly 80% of annual production of silver market. Again, this is paper manipulation of silver market and no rational person can believe this is anything to do with real market for silver. To me, this event is just for the sake of shaking amateur out of the market.
Regarding to people from CNBC's comment about small possibility for QE3, I simply can't believe this is the case since there are so many possible events that force Fed to print money into oblivion in 2012. Those events are:
Nearly $2.8 trillion of debt must be rolled over in 2012
War in Iran will be intensified
European sovereign crisis will unfold and will spread to US financial system via derivatives (CDS)
I believe some of those events will likely to happen. Even one of those events will negatively affect US economy in big time and force Fed to print massive amount of money. I personally believe that both gold and silver will break the record by end of 2012 and this is perfect buying opportunities to buy both gold and silver.
I understand that many are afraid to get back into the market but I would like to end this blog by famous Warren Buffett quote. He said "Be fearful when others are greedy and greedy when others are fearful". As all of you can tell, everyone is fearful. So, at least, I know what to do. Choice is up to you.
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Published: 05 April 2012