Cnbc-Silver Projection

Yes, that was unusual, both for the amount of the increase in margin requirements and the number of increases in so short a time. One can only wonder what their motivation was for doing that at that particular time. Of course, there is nothing to stop them from doing something similar to this again, is there?

I am selling most of my silver when it hits $50. I got lucky and sold about $200 in FV when it was at $46 per once, now I am sitting on quite a bit again with an average cost of $35 per once. I am really liking gold though I fear these premiums are going to kill me.

One thing I didn't understand about raising the requirements, was how fast they came. I would think they should have waited a bit longer after each one at least to see the effect of each raise. Cause the last one they announced for silver, they ended up not implementing, as the prices had already come down and speculators were out already.

As far as the future goes, I think we'll be going back to 50 soon.

I hope so, I bought a few in the 40$ an oz range.

As I understand it, the margin requirements are the amount of money that a trader has to put up front to control X amount of silver via a futures contract. I don't know the numbers but BiggFredd probably does. Anyway, here is a crude example: You are a trader and you want to invest $1,000,000 in silver futures. This allows you to buy 20 contracts for $50,000 each. The brokerage puts up most of the money via a loan to the trader but the trader also has to put up some cash, which is the margin requirement. This cash is a percentage of the cost of the contract. By raising this margin percentage, COMEX or whoever the market maker is, forces traders to either put up more cash per contract or buy less contracts. This change was pretty significant too. I don't recall the exact numbers but it was something like triple the original amount by the time that they were done. An investment that once cost the broker, say $6,000 per contract, went to $18,000 per contract. This makes it much more difficult for traders to buy as much as they want and also to make money on their trades because they are buying and selling frequently to squeeze a few tenths of a percent out of these contracts. Suddenly, it just was not possible to make very much money by trading the way that they had been, so most of the traders sold off their positions and silver prices dropped.

Personally, I think that moves like this tend to strengthen the silver market, although there is some short-term pain created by price declines. I would rather see a more steady and slow rise in silver prices than for them to be erratic and volatile all the time. On the other hand, an erratic market can provide some very nice buying opportunities.

Selling is a whole 'nother deal, though. When selling into an erratic market, we almost HAVE to do it electronically and not physically unless we have physical bullion in storage somewhere that can be used to make the trades. The speed of price changes can be a real killer when a market is bouncing up and down erratically.

I agree, Mitch. Thing is, though, that many of the people in government and in the markets are not long-term thinkers. They are the types who will send the world down in flames IF there is a short-term benefit to doing so. We see this from the politicians and their idiotic ideas and complete lack of spending control all the time. Other groups are just as guilty of this kind of behavior. Anyone who has grand children tends to consider their welfare as being important, often before their own. We need more grand parents in government and in the markets.