Why Silver Tumbled to $30/oz
Last week was a bloodbath. Gold fell from high of USD1900/oz to USD1657/oz while Silver fell from high of USD42/oz to about USD30/oz.
It all started with Operation Twist 2. A cleverly engineered “economy rescue plan” by Federal Reserved’s Chairman. Last Thursday, Mr. Ben Bernanke announced Federal Reserved’s plan to sell off $400 billion worth of short-term debt and using it to purchase $400 billion of long-term Treasury bonds. This is “rescue” idea of keeping low interest rate for many years to come.
The US DOW stock market reacted to Operation Twist 2 by crashing – crashing hard. US market lost more than US1 trillion in stock value within that week. Acting like a black hole, it sucked away commodities price to fill up for its hunger for cash.
Adding to that blow, news of yet another margin hike by CME creeped into the market. Gold interest went up 21% and silver up by 16%. Prices for Gold and Silver plunged.
That’s why silver tumbled.
Could this be the appetizer for hyperinflation? Could this be like what Mike Maloney mentioned in his video, the deflationary phase?
References:
- http://cnbusinessnews.com/here-are-5-reasons-why-gold-and-silver-declined-sharply-this-week/
- http://politicalmetals.com/2011/09/24/credit-where-credit-is-due/
- http://www.coinnews.net/2011/09/24/gold-prices-plunge-174-for-week-silver-tumbles-10-73/
- http://inflationdata.com/inflation/Deflation_Articles/Deflation.asp
- http://www.bloomberg.com/news/2011-09-23/fed-s-twist-fails-to-convince-investors-growth-will-follow.html
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