New York’s COMEX exchange has upped by 84% the amount of money that must be on deposit by speculators in order for them to borrow money to buy silver futures. This is just the latest rise in margin costs (i.e. borrowing costs) implemented by the COMEX since April 25th. The result? Catastrophic losses on silver investments.
I have been saying for many months now that commodities, especially gold and silver, are over valued and that the huge rise in value has not been tied to fundamentals, but to speculative froth. In fact, I am on record in Smart Money’s February cover story on gold saying that I expected that there would be a big fall in the prices of these metals.
Now that COMEX has raised the minimum margin account deposit to $21,600 per contract speculators are fleeing in droves. And now it is extremely obvious that the real reason that these prices have risen has nothing to do with all of the supposed fundamental analysis that is bandied about to justify the high prices. It is simply a plain old speculative bubble, fueled by naivete and greed.
I expect gold to be next on the list of big decliners once there is a 10%+ fall in the value of gold. In other words, I am anticipating a run for the exits.
Jason
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