Benefits are equalized by the man-in-the middle

Silver’s gone mad, a frantic broker tells me one morning on the chaotic trading floor of COMEX, the New York Commodity Exchange. He never really sees the metal: He only trades futures, contracts to buy or sell silver in 5,000-ounce lots at a set price on a future date. His clients—investors and speculators hoping to make money and industrial-silver users trying to save it—purchase futures with good-faith deposits called margin money and go long or short.

“If you go long,” the broker explains, “you agree to buy silver at so many dollars per ounce in, say, two months. If by then the prevailing price is higher, you get metal worth more than it cost you. Nice! Sellers go short. They expect silver’s price to fall, so that before they must deliver it, they can buy the metal they promised you for less than you agreed to pay them for it.”

man-in-the middle The broker adds that it’s even riskier than it sounds: Whenever the price of silver moves against you—down if you’re long, up if you’re short—you must quickly put up more margin money to guarantee your obli¬gations. If you own many futures, that can be millions of dollars.

IDLE SILVER ties up money and costs something to insure and store, so specula¬tors seldom care to accumulate it. Instead they balance long and short contracts to avoid losses and come out ahead, with cash. But lately, the broker tells me, mysterious big buyers have been taking delivery of the metal, disrupting the markets, and amassing huge stockpiles of silver. Big buyers . . . Kuwaiti bankers? Oil sheikhs? Interests in Hong Kong?

“Who knows?” I’m with a bullion dealer, possibly the world’s largest, also in New York City. He says it’s not his business to speculate, figuratively or literally; he simply moves metal.
In his trading room, clerks juggle tele¬phones, punch calculators, and take in¬structions from clients and other bullion dealers in Zurich, Hong Kong, and Beirut. The dealer picks up a shrilling phone—it’s London calling: “New York, silver has been fixed at $37.50.”


The firm’s representative at the London Silver Fixing has compared notes with men from the two other bullion trading houses that form the London Silver Market; they’ve called Frankfurt, Manila, Bombay. . . . Together the three men have matched buy¬and-sell orders, mirroring the world’s mood about silver that day.