Behind silver’s historic collapse is a market that came loose of its moorings, fueled by speculative traders, many of them small investors who may have jumped in at just the wrong moment.
“If gold is a Monte Carlo casino, silver is a slot machine in Las Vegas,” says Andy Smith, a senior metals strategist at Bache Commodities.
Even the most sophisticated investors are divided about precious metals. For many of Wall Street’s most-respected names, such as hedge-fund manager John Paulson, silver and gold represent protection from central banks that continue to spray money into the world’s financial system, threatening to push inflation higher. But others, like George Soros, view those fears as overstated, arguing that the Federal Reserve is unlikely to let inflation get out of hand. Mr. Soros’s funds have sold silver and gold positions in recent weeks.
All kinds of commodities have run up this year, but few markets surged liked silver. That’s because silver is different than most others, making it more susceptible to quick peaks, as well as plunges.