http://www.financialsense.com/fsu/ed...

What do you think will happen when (not if) the stock market continues to plunge and over-leveraged hedge funds are forced to cover their margin positions? Do you think they will be prone to selling illiquid holdings first, or those that remain liquid and have held value better than their bad speculations? You can bet the margin clerks will be demanding prompt payment, so my money is on liquid issues being under pressure, which is where GLD comes into the picture. Unfortunately, SLV the silver ETF, does not have the liquidity to qualify for this distinction, so like other less liquid issues it’s already suffering from dramatic price swings, such as the 5-percent drop just this past Friday for no apparent reason other than somebody had to blowout a position into thin market conditions. So you see even if these ETF’s are not forced to actually sell metal holdings, paper market related machinations will continue to force prices lower during illiquid times, with periods of accelerating deleveraging creating price vacuums despite the tight conditions in the physical markets. How’s that for a serious example of irony?