The Selloff
August 13, 2020 | SilverSeek.com
I hadn’t planned on writing about the very sharp selloff that started yesterday (Tuesday) in gold and silver, but can’t imagine anything more on investors’ minds – mine included. No amount of prior mental foresight fully prepares most for the type of selloff underway – no declarations of an overbought technical condition, warnings of increase price volatility or of big shorts’ being backed into a corner and not giving up without a fight. Here, I would bow to that noted philosopher, Mike Tyson, “everyone has a plan until he’s punched in the face.”
Actually, I’m probably being too harsh in that I’m sure most were prepared for some type of selloff or should have been, although in order to fulfill the purpose of why gold and particularly silver sold off as they did, it was necessary for the selloff to be much sharper than most would have anticipated. In other words, some type of selloff was coming and since that was fairly obvious, it made it imperative that it be sharper than most expected, otherwise the selloff would be wasted by those arranging it.
Because the thought that a selloff was no big surprise, it had to take on a bad and ugly side, while at the same time a very good side also resulted. Let me deal with the bad and ugly first, before turning to why the selloff will prove better for silver investors in the long run.
Aside from the steepness of the decline, one of the sharpest in silver market history, the selloff confirmed a whole host of previously understood facts about silver and gold. First and foremost, the vast majority of investors, certainly those invested in physical metal or mining shares get hurt financially on sharp selloffs, while few actually benefit. Even in futures markets and other derivatives contracts, where there is a short for every long, because of the pronounced concentration on the short side of COMEX silver and gold, more suffer on a sharp selloff – given that 8 big traders dominate the short side.
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