Mystery of the Fall of Silver Prices
On July 7, 2017 when the Japanese market was recently opened, the price of silver fell – called “flash crash “ – as far as about 7 to 10 percent before then recovering and experiencing a sharp rebound near the price before the tragedy occurred. Suspected, there are those who sell on silver futures contracts worth more than $ 450 million.
Silver prices were depressed to the range of $ 14.34 before rebounding.
Unofficial statements from relevant sources said that the incident was a “mistake” and they were “mobilizing all their energy” to solve it. If that is the case, then the alleged fat finger syndrome might be ruled out.
There is also the possibility that the aggressive sell-off – worth $ 450 million – was carried out by those who really wanted the silver price to fall. There may be hedge funds or anyone who has a short position on a silver contract so that their position has managed to reap huge profits.
What are the possibilities?
The fall in silver prices has been a hot topic of debate in the last few days after the flash crash . As usual, there are various speculations – even accusations – about what exactly caused the fall.
The first suspicion is the possibility of “fat finger syndrome “ as a cause.Fat finger is a term used when someone makes an input error which then causes a large number of wrong transactions to occur. Usually the error is to enter too many zeros.
Another suspicion is the sudden decline in liquidity that triggers panic selling . If we pay attention, prices have indeed moved in a relatively thin range from July 4 to 6. This is considered to foster concern that silver has been an illiquid asset since the recent acquisition of JP Morgan. It is said, there are those who suspect JP Morgan is doing a practice that violates antitrust laws.
Stop loss order theory is also proposed by the party as a trigger for this extraordinary event. Specifically, achieving a stop loss order quickly in a number of times can easily increase the effect of the sell-off , although initially it may not trigger a weakening. Moreover, many commodity traders in the United States who were on vacation at the time, it was very likely they implemented a “set and forget “ strategy in the transactions they did.
Actually there are many possibilities that could potentially be the cause of the silver price hit last Friday, but maybe we will not be able to discuss them one by one. In fact, it might be the result of a combination of several possibilities discussed above.
Even so, at least at this time the silver price seems to be moving steadily so that it will be easier to analyze the technical price movements of silver .