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Silver Manipulation?

There is a rumor floating around that the margin requirements on silver were raised by the CME today in an attempt to control prices downward.  The logic is that a 30% increase in maintenance margin makes it difficult for speculators to make large bets that prices will rise quickly as quantitative easing destroys the value of the dollar.  I will not dismiss the idea as false, because the outcome for today was a sharp drop in the price of silver:

Sharp drop in silver today

On the flip side, there is some logic in the move.  With the recent run up in silver the volatility of the asset class has skyrocketed.  Margin requirements are generally adjusted to compensate for larger volatilities in the underlying prices.  If there is more volatility then there is a greater chance that your futures contract will require a very large posting of collateral if the underlying moves against you.  The CME does have an argument in this respect, because the 30 day historical volatility of silver has been 38% while gold has been a meager 20%:

A lot of action in the silver markets

Maybe the Hunt brothers are just playing around again…

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Posted in Conspiracy, Derivatives, Markets.

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Continuing the Discussion

  1. There’s No Downside to Inflation | Clogr.com linked to this post on November 9, 2010

    [...] More Silver Manipulation? Could this be the cause of the massive down draft after the parabolic moonshot? [...]



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