Can somebody please explain to me what is wrong with speculators investing in silver? I keep reading things like "higher margins will shake out the silver speculators (a good thing apparently). Another thing I hear is "once the speculators are out of silver we will see silver's true value". Now I don't see a problem. People invest in various stocks, shares, or commodities for whatever reasons. Some go long and some go short. Some believe in one thing and some believe in something else. Surely this is all part of the gig, a big mix of people with differing plans, some folk risk everything and some risk very little.but all with the same ultimate goal..to be financially better off than they were before. Surely anyone who invests in anything is a speculator. You buy something at one price and hope to sell it some time later for a higher price than you paid. Just like some folk on this forum sold silver at near $50oz and reaped their profit. Some aim to buy back into silver in the low $30oz or high $20oz.and some will find something else to invest or 'speculate' in. Are the comments I see and hear referring specifically to 'paper' speculatorsis that the beef people have? Peace and love man.
I guess the differentiator here is "Margin". This creates highly volatile situations where paper traders are forced to either "sell" or "cover", which has a cascading effect on other margin traders. If you hold physical silver, and own it 100% you aren't forced to sell or buy. When the effects of "Margin" are removed, I do believe we will see a truer price. (Value is totally subjective)
On one level you're right, however let me make an analogy. Speculation leaves people who actually need the commodity worse off, in the same way as driving house prices to unaffordable levels leaves people who actually need a house to live in worse off even of they can afford one - they need to work longer to pay the mortgage and have a worse quality of life than they would otherwise have had. Speculation in silver has a similar effect on some kinds of manufacturers, though not to the same level.
what are you talking about? This is not what this topic is about at all... to OP. People don't like paper because its heavily manipulated by the establishments. This is why this forum advocates holding physical.
The question was "why is speculation viewed as bad". If you can't find anything related to that in my answer then perhaps you need to work on your comprehension skills.
The problem with speculators in general is that they worry about other speculators' opinions of each others' opinions, like the Keynesian beauty contest. So the price jumps around based on market sentiment rather than any real reason, which is bad. Now, I know we're technically speculators ourselves, but generally we have reasons to want to buy silver ie relatively inelastic mine production, declining scrap levels, renewable energy, worries about fiat etc whereas the people I'm talking about want to buy silver because they see some other people buying it and want to get in on The Next Big Thing. Same goes with other assets, if your long/short position is based on something you're helping to "price in" whatever information you've based it on, but if it's based on just thinking the price might be trending that way you're just putting noise/volatility into the price.
I believe you are right about them talking about the 'paper' speculators. Investors who are buying ETF's and not taking any physical metal delivery. They see them as people on the fences buyinjg and selling but not being actively involved in the process of touching metals. The problem I see with this though is now adays we have storage facilities, such as ABC Bullion in Sydney, that will store your silver, at a fee now, and if you buy and sell you still do not need to touch the metal. IMO, and I will probably get some flak for this, they confuse stackers of metal as people who will keep silver FOREVER, but everyone has their selling price. It doen't matter in 2, 5 or 10 yrs, it doesn't matter if you sell 10%, 50% or 100%. Silver stackers will eventually sell some of their stack. If SHTF occurs, stackers will definitely sell their stack. But, having said that, there are investors out there such as day traders, who will never want to touch the metal and will stick to ETF's, longs and short trading. I think it is these people that are being referred to as 'speculators'.
I think your right on the mark Lurkalot, everybody who takes any position on anything is speculating on its future value. Some people believe your only a speculator if your taking leveraged positions but the truth is even if you buy a single 1oz silver coin you are still speculating on the future value of that coin in that case being long. Some people here seem to be pretty aggainst any leveraged bets or 'paper' trading on silver specificlly. The market will generally set the price for anything, if investors believe the price of something is too high investors will begin to short in a attempt to gain from corrections.
Aahhh! So logically.... Not buying a silver 1 oz coin is equally speculative, as you are effectively deciding that the future price (not "value") of silver will stay the same or fall. That means that there are 20,000,000 silver speculators in this country alone.
I think big speculators on COMEX do bring instability to the COMEX market. The COMEX is supposed to use margins to stabilise things and perhaps shake out excessive speculation. It seems to me they raised margins a few times with no affect on the rise up and then at about 9% margin the collapse occurred (same as 2006 BTW). The question is who sold out? Someone big? The problem is that Silver is both money and commodity. COMEX is only interested in it as a commodity. And they are motivated financially to make sure that they have enough "margin insurance" to cover the bets of speculators (or push them out). The bigger a unjustified bubble seems to be the bigger the risk to COMEX. Therefore bigger "margin insurance". Us silver-money people are having our prices set by an exchange who only cares about it as a silver-commodity and is tasked with keeping that aspect of it stable. Not really a conspiracy, how else can it be? A silver market run by silver bugs? The mistake COMEX made seems to be that the margins were too low for the beginning of this year and this allowed excess speculation at low margin cost. This speculation rides on the back of the popular internet campaigns to buy silver, which rides on the back of a collapsing $US and US economy. Then the COMEX had to over compensate leading to a boom/bust effect to bring some sort of stability back for industry. I see the COMEX now as the same as the Fed setting interest rates. They are tasked with the job of keeping commodity prices rising in a somewhat stable way. They are failing at this and this leaves room to speculate why. Would they inform their banker/speculator friends before changing margin costs so they can front run the boom/bust cycles? Are they just incompetent? Do they use some formula which isn't strictly related to price but volume or some other metric? Were they caught off guard? Do they act slowly because it is impossible to guess what margin rate will have the desired effect? Silver is up 52% AUD over a year. Is that not enough? Buy the dips not the spikes.
I'm not sure what you don't understand about my post, i'm saying somebody even buying a something as small as 1oz of silver is taking a position. I'm not sure if you know this so ill explain it to you, you can goto a shop and buy more than 1oz you could even use leverage and get allot more oz for your buck but either way your speculating on the rise or fall of the metal.
Yep ... And I'm saying, not buying is also taking a position. It could be argued that you have to have knowledge to be a true speculator.... I'd almost argue the opposite
Generally speaking, nothing! Speculation is rampant in everything from weather reports to the stock market. The speculators on COMEX are leveraged to their eyeballs and small fluctuations in the price could very possibly screw up their position. This creates a very volatile market and leads to a lot of problems in the long run and eventually market failure. By raising the margin required, in THEORY you will be less affected by fluctuations in the underlying price and this will reduce the volatility in the market. But in practice, COMEX is not doing % margins like the stock market but setting an artbitary value so whether it is as effective is debatable. Excessive speculation does cause a lot of problems as well, perhaps you may remember a few years ago when Macquarie Bank was being shorted like a mad man on the market and regulators came out and said "No shorting financial company stocks!! (for a while)". Almost everyone the market had a bearish outlook for Mac bank and well, a spiral and chain reaction of gloom and doom killed their share price at the time. You don't want that happening to Silver, that's how bubbles and crashes happen. Leveraged speculators create an artificial supply and demand which pushes prices away from the market equilibrium and would not reflect the true market value. By being leveraged they can 'afford' more of the commodity than they actually can buy/sell and creates artificial numbers. If you believe in supply & demand then by removing these leveraged players we will see a true supply and demand happen in the market and we will reach the true price (market equilibrium). Pretty much everybody is a speculator whether they admit it or not. Everybody speculates in something. The weather, their future, housing prices, price of toilet paper at Coles next week, honey prices etc I guess a fair few people have beef with paper speculators, I'm not one of them though. I respect their right to hold paper, I like my physical because it's shiny shiny shinyyyy.
