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TFC Commodity Trading Forum

Maelstrom in Metals may Tear thru Currency Markets

In financial markets today the tempest is never contained to the teapot. Because of the nature of markets, leverage, and margin, a small, somewhat obscure market like silver can have an outsized effect on the world’s currency markets. Even a modest correction at this point in the precious metals complex could likely create a domino effect as global investors exit their other momentum plays – trades disguised as investments – to meet the margin calls created by excessive volatility. In commodities the exchanges reserve the right to raise margins as a way to insure that holders of the contracts have enough cash in their accounts to weather sizable price corrections. This morning’s sharp sell-off in silver was mirrored by 50 pip sell-offs in AUDUSD & EURUSD.

Jay Norris is the author of Mastering Trade Selection & Management, McGraw-Hill, 2011.

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