Now why did the price of silver go from 50 to 26? Because of the low demand - or was there another reason? One reason the price began to fall was that the margin was increased by the commodities exchange. If you speculate in silver futures, you can use leverage to make more money. If you use leverage, you need to have a percentage of the market value on your bank account as a safety. This percentage was increased when the price of silver was 50 and many traders had to sell silver to be able to have more money as a safety. The margin may increase again if the price of silver is moving up in 2012, and the price of silver may once again begin to move down.
Currently, silver has increased from the low of 26 to 32. Should silver move up to 50 again, or is the move up only temporarily? The reason to the latest move in silver was probably that Eric Sprott announced that he was going to add $300 million of physical silver to the Sprott Physical Silver Trust. The Sprott Physical Silver Trust is offering investors to speculate in physical silver with the theory that the price of physical silver may increase more compared to the price of silver futures (paper silver).
Source: Zero Hedge