Silver futures experienced a wild rollercoaster ride on Tuesday, with a lot of action and a lot of speculation in the air.
However, the biggest event actually happened outside the silver market, and it demonstrated some of the risks inherent in investing in exchange-traded products. In this case, the main victim was the SLV exchange-traded fund (ETF), which, like the very similar GLD, purports to track the physical price of silver.
Silver rose above $30 per troy ounce today, but it retreated from those record highs fairly rapidly. That retracement, however, generated a drop of nearly 5 percent in the SLV ETF, with more than double the average daily trading volume.
Some saw the hand of desperate shorts, selling a large number of contracts in an effort to resist the seemingly inexorable rise of the metal's price. Another possibility is a spate of profit-taking after silver breached the $30-per-ounce level.
Whatever the cause, silver futures investors were disappointed today after an initially promising start. Investors and traders in the ETF, on the other hand, got absolutely crushed.
It remains to be seen if silver has the legs to fundamentally break through the barrier that's been set at $30 per troy ounce.
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