Clearing houses and exchanges reportedly hike margins to make sure traders actually have the cash to back up their positions, which supposedly protects against volatility. The idea is that it shakes out the "hot" money, or froth, or big leveraged bets, from the market. Anthony Neglia, president at Tower Trading, has turned bearish on silver as promised after it broke below $38, "the next major level of support is $36, there was a quadruple top there in March before we broke out so now that becomes support ... If that level happens to fail, $32 rings a bell." Neglia is watching to open interest volume to see when the metal gets oversold. Silver's selloff has been fast and furious and has taken gold with it. The SPDR Gold Shares ( GLD) dropped almost 5 tons on Wednesday while the iShares Silver Trust ( IAU) shed 521.8 tons bringing the total to 626.49 for May.
But not all exchange-traded funds are seeing this kind of mass selling. Tim Harvey, senior vice president at ETF Securities, said he hasn't seen any major redemptions from its gold and silver physically backed ETFs in the U.S. ETFS Physical Gold ( SGOL) and ETFS Physical Silver ( SIVR). "I think it says that the people using us at the moment are the asset allocators and the investors ... if you're a day trader I think you've been finding your access to silver through futures or other means but if you've been an investor in silver for the medium and long term, you've been with us," Harvey said.
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