Precious Metals no Longer a Safe HavenSubmitted by DrKrbyLuv on Thu, 09/29/2011 - 18:10
Last week there was a major paradigm shift that should trouble all precious metal holders including myself. The problem is that most of the precious metal market is no longer rooted in the value and scarcity of physical material.
Most of the investment market is priced on precious metals that do not exist, they are paper "claims" through futures and ETFs (e.g. ETF GLD). A big part of the sudden downturn in PM prices last week can be attributed towards the fact that "CME hiked gold margins by 21%, silver by 16% and copper by 18%" (This was covered by Zero Hedge http://www.zerohedge.com/news/case-closed-cme-hikes-gold-sil...)
ETFs have been exploding at a rate of over 40% a year for the last decade. A big surprise is that ETF trading accounts for 35% to 40% of all exchange volume, according to Morningstar Inc. -- http://www.google.com/finance?q=NASDAQ:MORN
When you buy PMs today, you are entering a market largely dictated by the volatility of paper facsimiles as opposed to the "intrinsic value" of what you may think is a tangible commodity.
The bottom line is that PMs, like most markets, are thoroughly manipulated. PMs are not the tangible assets that they may have been several years ago. It is time to find other safe havens.