The precious metal has outperformed gold recently, apparently due to an unusual condition in the silver futures market
Silver spot and futures prices hit a record high on Monday on the spreading unrest in the Middle East and the falling dollar. However, it seems that the real reason for the surge may lie somewhere else.
Very simply, if silver has risen due to the political turmoil in the Middle East, why has gold not gained at the same pace, and why is the dollar which is traditionally the safe haven in a crisis still weak?
The current situation in the silver market isn't just about prices, but about a particular condition called 'backwardation'. Silver is in backwardation, which is a condition when buyers in the futures market are ready to pay a premium to receive the contract sooner due to fear of a shortage of the metal.
Two banks JP Morgan and HSBC are rumoured to be short on silver and they are said to be covering up their positions and this is pushing the price up.
The current prices are being built up on speculation, not on fundamentals. Depending on the technical position of the silver futures market, these prices may or may not sustain.
Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam
Fiercely independent and pro-consumer information on personal finance.
1-year online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
30-day online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
Complete access to Moneylife archives since inception ( till the date of your subscription )