Volatile silver | FT Alphaville

Volatile silver

It turns out that bank holidays can make for interesting silver markets:

As Dow Jones noted, two weeks of gains for the precious metal were erased in only 11 minutes as markets opened for electronic trading in Asia on Monday, with prices falling as much as 12 per cent in the session.

Much of the sell-off was attributed to the CME imposing tougher margin requirements for speculative traders for the second time in a week. Although, some also cited fears that the Comex could soon experience a delivery problem as spooking the market.

News that one of the biggest silver bulls in the world, Eric Sprott of Sprott Asset Management, had started selling may also have contributed to the move.

A document released to the SEC on April 28 (via Zero Hedge) showed that the asset manager had sold $35m shares of PSLV, a Sprott-owned silver ETF, last week.

Even so, Sprott claims he has not lost enthusiasm for the metal and that every penny raised from the sale will be reinvested into either silver or silver equities. This, of course, means the sale may have been more about cashing in on the fund’s well-known premium to net asset value than a change of heart on the silver market itself.

Either way, the main takeaway for investors is that volatility in silver prices is on the rise. So much so, in fact, that some brokers are even imposing margins above those required by the CME.

As Olivier Jakob of Petromatrix commented on Tuesday, this “is not something seen very often”. What’s more:

Given that the gains in commodities for 2011 are mainly concentrated in oil and precious metals we need to keep a watch on silver.

Related links:
Silver’s dramatic rise comes to abrupt halt – FT Alphaville
Bullion strength points to investor nerves – FT