On Thursday, July 6, in the late afternoon (as reckoned in Arizona), the price of silver crashed. The move was very brief, but very intense. The price hit a low under $14.40 before recovering to around $15.80 which is about 20 cents lower than where it started.

Buyers of silver are rejoicing. They can now get more money (silver, like gold, is money) in exchange for their dollars than before. However, as we see from the reactions in the community, there were few buyers.

Cries of woe are heard everywhere. Those who are crying are sellers, including those who say they don’t plan to sell but who really want a high price in case they change their mind by Monday morning.

If you want to see what it looks like when everyone is thinking of buying, look at the bitcoin market when there is a price drop. The enthusiasm is palpable. Everyone is gloating about buying the dips, with faith unbroken that the cryptocurrency is on its way to shoot past $10,000 if not $1,000,000.

Gold and silver are the opposite. For now. And perhaps that is a sign that here is a good opportunity. Blood in the streets, as the expression goes.

The purpose of this article is to look deeply into the trading action at the time of the crash. First, here is a graph showing the bid and offer prices for about 50 seconds. The horizontal axis shows time, but it is ticks rather than seconds or milliseconds. So, for example, it does not show the 10-second period when CME halted the exchange.

For most of this time period, there is an orderly market as seen in the tight bid-offer spread, though even from the start we observe that on price drops the bid drops more. That becomes extreme where the bid hits $14.10 (which occurs right after the halt). From that point onwards, we see a very wide bid-offer spread. The bid looks to be held low deliberately, around $14.33, while the offer is moving around as buyers begin lifting it.

Let’s address the wide spread. The banks have been under assault for their trading practices. Among other things, they are blamed for having proprietary positions, for “leaking” information during the Fixing, for having a too-large position, etc. The net result is to push the compliance department into prominence. No longer can the bank act when the market offers a profitable opportunity for arbitrage.