DiscussWorldIssues - Socio-Economic Religion and Political Uncensored Debate - View Single Post - What the hell... Silver just jumped $1+ just now

**vasyasvc** · 06-25-2012, 10:31 PM

I like lows because I can buy lots more for my money. I like highs because I feel more secure. But these sudden moves in price of Silver scares me. I get the feeling there's something really unstable. Much like a wheel out of balance that's about to come flying apart...

Anyone know what's up? What's causing it?

Some fund manager just rotated a big chunk of money out of some other sector into silver. This is what happens in all big market movements. It may or may not be triggered by a specific event. When it's not, it's a fund manager doing what you and I do, i.e. deciding that he may not get a better buy price so he's taking the plunge now. When it's this big of a move, it is sometimes a "feeler" to see if other fund managers (also looking for a better price) will follow suit and jump in (driving the price higher), or not. Since silver is a relatively small market, one fund manager can move the price.

Rather than other funds following suit, another fund manager might actually test the mettle of the first fund manager by putting in a big sell order at this higher price, driving it back down. A third fund manager might see this, and try to screw the first fund manager by following suit of the second fund manager, driving the price further, and seeing if the first guy will panic and sell out, driving it down even further. This might cause fund managers #4 and #5 to think that it's time for their buy move.

This is how price discovery works. It's like a game of chicken amongst the big players, with the rest of us along for the ride. Every single one of those fund managers might think that silver will ultimately be $50 again, or even $100, but how they play their cards along the way determines how we get there. The wheels only fall off if there is a change in fundamentals.

If you want to know more, here's an explanation of how market prices move in distinct cycles...

Fund managers collectively move prices in four stages:

1) Accumulation. When the price of something they value is relatively low (like silver at $25), they will slowly accumulate it, careful not to raise the price until they have accumulated a sufficient amount.
2) Mark Up: Once a sufficient position is accumulated, they start buying in high volume (further increasing their position) causing the price to steadily rise. The intent here is to get the retailers (suckers like you and me) to jump on the price train.
3) Distribution: Once the retailers are on board, the fund managers will slowly stop buying, letting the momentum of new retail buyers drive the price up. At some point as the price rises (much higher than their own buy prices), the fund managers will use the retail demand to slowly start selling, or "distributing" the shares they have accumulated. The new excited retailers will soak up these shares. The fund managers will slowly accelerate their selling to match their supply with the retailer demand, essentially maintaining a stable high price as they slowly unload their shares. At some point, once the retail buyers start to run out of dry powder to deploy, the price will begin to drift downward. This leads to...
4) Mark Down: The fund managers have made their biggest profit, so they begin to unload all their remaining shares furiously in order to drive the price forcefully downward. At some point during mark down, retailers panic and start to sell their shares as well, which drives the price down even further. By then, the fund managers have unloaded all of their shares, so the continued downward price is primarily driven by retail sellers. Once they've done all their selling, the price flattens, and the fund managers start accumulating again.

Now, the cycles don't always appear smooth because their are lots of fund manager decisions contributing to the collective movement. That's why there are price dips and spikes (like today) embedded onto the longer cycle movement. They're playing chicken.

06-25-2012, 10:31 PM	#7
vasyasvc Join Date Oct 2005 Posts 521 Senior Member	I like lows because I can buy lots more for my money. I like highs because I feel more secure. But these sudden moves in price of Silver scares me. I get the feeling there's something really unstable. Much like a wheel out of balance that's about to come flying apart... Anyone know what's up? What's causing it? Some fund manager just rotated a big chunk of money out of some other sector into silver. This is what happens in all big market movements. It may or may not be triggered by a specific event. When it's not, it's a fund manager doing what you and I do, i.e. deciding that he may not get a better buy price so he's taking the plunge now. When it's this big of a move, it is sometimes a "feeler" to see if other fund managers (also looking for a better price) will follow suit and jump in (driving the price higher), or not. Since silver is a relatively small market, one fund manager can move the price. Rather than other funds following suit, another fund manager might actually test the mettle of the first fund manager by putting in a big sell order at this higher price, driving it back down. A third fund manager might see this, and try to screw the first fund manager by following suit of the second fund manager, driving the price further, and seeing if the first guy will panic and sell out, driving it down even further. This might cause fund managers #4 and #5 to think that it's time for their buy move. This is how price discovery works. It's like a game of chicken amongst the big players, with the rest of us along for the ride. Every single one of those fund managers might think that silver will ultimately be $50 again, or even $100, but how they play their cards along the way determines how we get there. The wheels only fall off if there is a change in fundamentals. If you want to know more, here's an explanation of how market prices move in distinct cycles... Fund managers collectively move prices in four stages: 1) Accumulation. When the price of something they value is relatively low (like silver at $25), they will slowly accumulate it, careful not to raise the price until they have accumulated a sufficient amount. 2) Mark Up: Once a sufficient position is accumulated, they start buying in high volume (further increasing their position) causing the price to steadily rise. The intent here is to get the retailers (suckers like you and me) to jump on the price train. 3) Distribution: Once the retailers are on board, the fund managers will slowly stop buying, letting the momentum of new retail buyers drive the price up. At some point as the price rises (much higher than their own buy prices), the fund managers will use the retail demand to slowly start selling, or "distributing" the shares they have accumulated. The new excited retailers will soak up these shares. The fund managers will slowly accelerate their selling to match their supply with the retailer demand, essentially maintaining a stable high price as they slowly unload their shares. At some point, once the retail buyers start to run out of dry powder to deploy, the price will begin to drift downward. This leads to... 4) Mark Down: The fund managers have made their biggest profit, so they begin to unload all their remaining shares furiously in order to drive the price forcefully downward. At some point during mark down, retailers panic and start to sell their shares as well, which drives the price down even further. By then, the fund managers have unloaded all of their shares, so the continued downward price is primarily driven by retail sellers. Once they've done all their selling, the price flattens, and the fund managers start accumulating again. Now, the cycles don't always appear smooth because their are lots of fund manager decisions contributing to the collective movement. That's why there are price dips and spikes (like today) embedded onto the longer cycle movement. They're playing chicken.
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