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Home / Futures Blog / Silver futures surge; some see unwinding of short positions

Silver futures surge; some see unwinding of short positions

November 9, 2010 by Daniels Trading

Silver futures continued the massive surge that's been occurring in the precious metals futures market for the past few days. Some believe that the pressure this increase is putting on those holding short positions may result in some traders liquidating their positions and pushing the market higher yet.

December silver came close to $30 per troy ounce today, with December delivery contracts rising $1.658 to trade at $29.09 per troy ounce. In the Indian markets – where a large portion of the world's silver is consumed – the white metal rose to an unheard-of 41,684 rupees per kilogram.

Gold futures also rose, with December gold climbing $18.90 to $1,422.10 per troy ounce. The rise in precious metals has partly been stirred up by the fears of inflation created by the U.S. Federal Reserve's quantitative easing program, but a burgeoning scandal in the U.S. financial markets has also played a role.

Bart Chilton, one of the commissioners of the Commodity Futures Trading Commission, stated last month that the silver markets had been the target of some attempted market manipulation. In the wake of that announcement, a number of professional traders, some with ties to banks like Goldman Sachs and JPMorgan Chase, have filed suits against JPMorgan and HSBC, alleging that these institutions used naked shorts and other techniques to suppress the price of silver.

Neither bank has offered comment on the allegations.

With the metal's price now soaring, anyone holding major short positions will be losing millions, possibly hundreds of millions each day in the markets. If traders with large short positions did liquidate them, they'd have to buy tons of expensive silver – putting even more impetus behind the rise of silver.
 

Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

Filed Under: Archived News

About Daniels Trading

Daniels Trading is an independent futures brokerage firm located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading is built on a culture of trust committed to the firm’s mission of Independence, Objectivity and Reliability.

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Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

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