Silver

[Weatherman]

Zed,

You are right - to a point. There are millions and millions of ounces leaving COMEX inventories - people ARE taking delivery. Yes, it may not be on the scale of LBMA, but, it is the price discovery mechanism in the US during US hours - and it DOES set the price of silver. When I go to buy silver, the person I am buying from isnt quoting LBMA prices to me - but, COMEX prices. If and when the day comes where that COMEX price isnt respected and those that do seek delivery arent confident they can procure it through that mechanism, they will resort to dealing with refiners to procure supply - and that will require a different price quote mechanism (something besides COMEX) of some sort.

Its hard not to think like an American - I am one. I have great respect for what this country was founded to be - but, am disgusted by what has become of it and I feel like a stranger in a strange land.

I grok (http://en.wikipedia.org/wiki/Grok) that! (I provided the link for the benefit of our younger readers. :wink:)

[Zed]

Zed,

You are right - to a point. There are millions and millions of ounces leaving COMEX inventories - people ARE taking delivery. Yes, it may not be on the scale of LBMA, but, it is the price discovery mechanism in the US during US hours - and it DOES set the price of silver. When I go to buy silver, the person I am buying from isnt quoting LBMA prices to me - but, COMEX prices. If and when the day comes where that COMEX price isnt respected and those that do seek delivery arent confident they can procure it through that mechanism, they will resort to dealing with refiners to procure supply - and that will require a different price quote mechanism (something besides COMEX) of some sort.

Its hard not to think like an American - I am one. I have great respect for what this country was founded to be - but, am disgusted by what has become of it and I feel like a stranger in a strange land.

The thing is any shortfall in the small amount delivered on the Comex will come from London when needed. The Comex warehouse numbers are not really telling you a whole lot about the physical situation, if the Comex where ever to default it would be FOLLOWING a London default. Sure when you buy it is US set pricing but its is the small amount traded on the NY OTC SPOT market not the futures market that determines your pricing. Spot markets are all cash and delivery all the time! The Comex warehouse inventories are more to do with the futures market participants, people trading the spot market know they have to deliver in a couple of days so there is no nudity! Trouble with real metal deliveries, if it is to happen, will come from London.... that is where anyone who is anyone gets most of their metal. Sure they might have hedged a future need on the Comex... but that will be cash settled when the metal is required and then acquired on the LBMA, that is the place that is setup to churn out metal on a daily basis.

The other thing is ... it is quite common for futures prices not to be respected! Just because the December 11 contract for silver is trading at x now it means little come Dec 11. In the end it will be reigned into the spot markets willingness to deliver at the prevailing price, it must be otherwise no metal moves. If there is ever a big discrepancy between spot and the closing contract then you would see a run on Comex inventory as the higher spot price would place a drain under the futures market... arbitrage would come into play.

At the end of the day the Comex is metals hedging and speculating market, as long as it performs those functions and settles cash commitments effectively the serious players expect little more of it... by and large they go to London when they want the metal.

[beastie]

Zed,
You wouldn't happen to have a blog out there would you?
I found one a few months back by an Australian guy who went into the nuts and bolts of the Comex and LBMA. Forgot to bookmark it though and never did finish reading it all.

Great thread guys. Thank you all.

[Zed]

Zed,
You wouldn't happen to have a blog out there would you?
I found one a few months back by an Australian guy who went into the nuts and bolts of the Comex and LBMA. Forgot to bookmark it though and never did finish reading it all.

Great thread guys. Thank you all.

No... I keep thinking about it but for some reason I hang here?!

Got the link?

[Zed]

Also.... another point... keep in mind that Comex good delivery spec is now in line with London good delivery spec as of a few years now. What does that tell you about where the metal is coming from these days!

[beastie]

No I can't find the damn site. I'll sleep on it and maybe it'll come to me. You reminded me of him. Maybe it's the accent.

I got the link through a commentary on Zerohedge maybe 4 months ago.

He has a deep understanding of the way the game is played in the paper markets. I spent a couple of hours reading his site and forgot to bookmark it. Doh!

[kiwi_envoy]

is this the one beastie?

http://goldchat.blogspot.com/

[anywoundedduck]

Theodore Butler has just come out with his latest on the CFTC not taking any action on limits of silver short contracts, and ending the meeting abruptly without rhyme or reason, even though the purpose of this meeting was to address the silver short contracts being out of balance.

Butler seems to have gone off on a tangent, pointing the finger at the Chinese for being behind this gargantuan and out of balance short position. Gave me a headache.

http://news.silverseek.com/SilverSeek/1293027946.php

[beastie]

is this the one beastie?

http://goldchat.blogspot.com/

That's it!
Thank you sir now I can finish reading it.

[Curtman]

Theodore Butler has just come out with his latest on the CFTC not taking any action on limits of silver short contracts, and ending the meeting abruptly without rhyme or reason, even though the purpose of this meeting was to address the silver short contracts being out of balance.

Butler seems to have gone off on a tangent, pointing the finger at the Chinese for being behind this gargantuan and out of balance short position. Gave me a headache.

http://news.silverseek.com/SilverSeek/1293027946.php

Isn't that five day old news? We are stuck in range here at a time when the raiders usualy attack so something must matter.

[anywoundedduck]

Isn't that five day old news? We are stuck in range here at a time when the raiders usualy attack so something must matter.

The report, refererences the meeting that was a week ago. The report is dated today.

To me, it is news that Butler is now pointing the finger at an unknown Chinese entity that is duping JP Morgan, with their large short position in silver. (I don't buy it, for a minute)

And, yes, silver and gold seem to be flat going into the Cbristmas holidays as traders took off early for the holidays, or so it seems. (Chinese don't celebrate Christmas, and have their own New Year)

[Curtman]

They probably have not hit it to hard because they suspect the chinese will at any minute buy every contract and call the marker. Wouldn't that be the end of it there?

[Zed]

The report, refererences the meeting that was a week ago. The report is dated today.

To me, it is news that Butler is now pointing the finger at an unknown Chinese entity that is duping JP Morgan, with their large short position in silver. (I don't buy it, for a minute)

And, yes, silver and gold seem to be flat going into the Cbristmas holidays as traders took off early for the holidays, or so it seems. (Chinese don't celebrate Christmas, and have their own New Year)

If correct it has probably just been good business for all concerned that has just gone too far. Now it looks like there are going to be ramifications people are doing what they can to cover their bottoms. These situations normally grow from being a little bit naughty to being outright criminal... once across the 'legal line' and if your partners will not let you out of the deal, the only choice is to go until you can go no longer.... which normally just digs the hole deeper. These guys look guilty and trapped.... the remaining questions are the extent of the crime and what real difference has it made to POS.

I wonder what Butler will do if this resolves? He will be lost without his nemesis! LOL... GIM will cease to be without the demon JPM, it will get down right boring!

[Zed]

Trader corners 80pc of copper market (http://www.theaustralian.com.au/business/news/trader-corners-80pc-of-copper-market/story-e6frg90x-1225975052785)


The recent boom in metal prices has enabled traders to purchase the physical metal, sell a futures contract at a much higher price and still make a profit after paying for storage and insurance.

i.e. they are long in London and short on the Comex, not naked but not visible to the Comex inventory watchers.

[anywoundedduck]

I wonder what Butler will do if this resolves? He will be lost without his nemesis! LOL... GIM will cease to be without the demon JPM, it will get down right boring!

I can take boring. Boring is good. Give me boring.
AWD

[Dizzy47]

The thing is any shortfall in the small amount delivered on the Comex will come from London when needed. The Comex warehouse numbers are not really telling you a whole lot about the physical situation, if the Comex where ever to default it would be FOLLOWING a London default. Sure when you buy it is US set pricing but its is the small amount traded on the NY OTC SPOT market not the futures market that determines your pricing. Spot markets are all cash and delivery all the time! The Comex warehouse inventories are more to do with the futures market participants, people trading the spot market know they have to deliver in a couple of days so there is no nudity! Trouble with real metal deliveries, if it is to happen, will come from London.... that is where anyone who is anyone gets most of their metal. Sure they might have hedged a future need on the Comex... but that will be cash settled when the metal is required and then acquired on the LBMA, that is the place that is setup to churn out metal on a daily basis.

The other thing is ... it is quite common for futures prices not to be respected! Just because the December 11 contract for silver is trading at x now it means little come Dec 11. In the end it will be reigned into the spot markets willingness to deliver at the prevailing price, it must be otherwise no metal moves. If there is ever a big discrepancy between spot and the closing contract then you would see a run on Comex inventory as the higher spot price would place a drain under the futures market... arbitrage would come into play.

At the end of the day the Comex is metals hedging and speculating market, as long as it performs those functions and settles cash commitments effectively the serious players expect little more of it... by and large they go to London when they want the metal.

clear and to the point, thanks man
now i see why Rock. & Rot. families left the business of gold price fixing in london few years back
that's where the trouble will start

[Dizzy47]

btw, i kinda dont like ag now & here...

[Zed]

clear and to the point, thanks man
now i see why Rock. & Rot. families left the business of gold price fixing in london few years back
that's where the trouble will start

LOL... I thought it was confused!

Hey Dizzy.... you are half way to 126! Not bad old fella! Only another 63 to go... :biggrin:

[Strawboss]

Merry Christmas everyone.

[Anakin]

btw, i kinda dont like ag now & here...

The American monetary base doubled; there's no reason to be suprised by a move from $15 to $30.

Of course, corrections do occur. lol

[StateofJefferson]

Those cute little bears are back:

http://www.zerohedge.com/article/jp-morgue-whitsleblowers-are-back-cuddly-bears-continue-expose-silver-manipulation-story

[Zed]

Right... so there is no silver on the LBMA, nobody in industry is getting silver and it has somehow not made the headlines? All these production lines that run on 'just in time' inventory management, for which silver is a unsubstitutable raw material are what?... stopping?... because there is no commercial silver left?... and it is not all over the headlines?

LOL Colour me skeptical...!

JPM insiders talking to animated bears and people are taking it seriously... the world has finally gone nuts!

[krugger3]

Everyone knows that Bears are smart and they are cute as can be. I give them credence. :)

[jbilprophet123]

Everyone knows that Bears are smart and they are cute as can be. I give them credence. :)

Out of boredom if for no other reason i made one trade last and ended short
15% of smaller portfolio with ZSL somewhere in 29.50s forgot to cover at 28.98 or so.

Let us see which direction breakout occurs.. and when..

[Rip Van Winkle]

Does holding stocks over the new year complicate taxes to much degree?

[Zed]

Does holding stocks over the new year complicate taxes to much degree?

No it should not, the sell date determines the point the gain/loss is calculated and the tax year it is in, thats all you need to know really.

[dosman]

does anyone have the balls to short at 31?

[svm]

got burned twice.. aint doing that again.

[dosman]

sometimes it's fun to play with fire. I am going to short with a 20 cent stoploss if silver opens above or goes above 31 tomorrow

[Strawboss]

THE DOUBLE BARRELED SILVER ISSUEEric Sprott & David Franklin, Sprott Asset Management


We’ve taken excerpts from an article by some very smart Canadians who excel in the resource sector.

“In studying the silver market we owe a great debt to the work of silver analyst, Ted Butler. Mr. Butler has been writing about the silver market for fifteen years and has done much to inform investors about the reality of silver’s physical fundamentals. Butler provides some insight into the “short” positions that exist in silver today, highlighting the fact that the eight largest silver traders currently hold a net short position of over 66,000 contracts, representing more than 330 million ounces of silver. This means that the eight largest COMEX traders are short the equivalent of 48.5% of the world’s total annual silver mine production of 680.9 million ounces. None of these traders are in the silver business by the way – they’re all financial institutions. In addition, the COMEX silver short position held by the eight largest traders on May 3, 2010, represented 33% of total world silver bullion inventory, estimated by Butler to be approximately one billion ounces. . .the concentrated short position in silver is 27 times larger than that for gold. In every comparison possible, the short position in COMEX silver contracts is off the charts, and if you think the short positions sound potentially disruptive, you’re not alone. In September 2008, the CFTC confirmed that its Division of Enforcement has been investigating complaints of misconduct in the silver market. This investigation is ongoing and we look forward to its resolution.

“Because we believe the demand for precious metals will continue to increase in this environment, we’re always interested to know the total supply available in today’s physical bullion market. According to the best estimates from the USGS and current mining statistics, approximately 46 billion ounces of silver have been mined since the dawn of civilization. In comparison, approximately 5 billion ounces of gold have been mined throughout history.

“As mentioned above, there are only 1 billion ounces of silver left above ground in bullion form today. That is a surprisingly small number in relation to the 46 billion ounces mined throughout history. The reason is due to silver’s consumption in manufacturing. Just like other industrial minerals, silver has been consumed in various processes over the course of history. Silver’s superiority in heat transfer, conductivity and light reflectivity make it unique, and it boasts anti-microbial properties that make it ideal for surgical instruments, clothing materials and certain medical applications. The key point to remember with all these applications is that once the silver is consumed it is typically never recycled. Many of its industrial applications require such small amounts in each surgical tool, electronic device or clothing item that it isn’t economic to recover from garbage dumps. For comparison, there are currently approximately two billion ounces of gold above ground in bullion form compared with the 5 billion ounces of gold mined throughout history. So despite being more heavily mined over time, silver bullion is now the more scarce “precious” metal than gold bullion from an investment supply perspective.

“The bottom line for us is that silver appears to be a fantastic investment today. Limited supply, strong demand, a potential buyer of almost half of one year’s global mining silver output make a great case for owning silver in physical form. Based on our calculations, it appears that the silver investment demand statistics published by GFMS and The Silver Institute are highly misleading at best. We believe the investment demand for silver is multiple times higher than what’s published, and given the outrageous short position in silver on the COMEX, coupled with the unsustainable buying ratios relative to gold, the case for physical silver is simply outstanding. As the expression goes, “every cloud has a silver lining.” Notice it isn’t a gold lining or a platinum lining. In the silver market, the cloud has been duly represented by poor estimations of investment demand coupled with large outstanding short positions. That cloud will soon lift, revealing a “silver lining” that is far more valuable than it is today.

“The money flows into silver in November 2010 have been staggering. Consider the investment demand generated from only two sources: the iShares Silver Trust ETF (SLV) and U.S. Mint sales. The SLV added approximately 18 million ounces of silver in November alone; the U.S. Mint sold 4.2 million ounces of silver coins. If you multiply these amounts against today’s silver price of $28, money is flowing into the silver market at an annualized rate of $7.5 billion dollars! At that rate of demand, it won’t take long before all the remaining above ground silver is spoken for.

“Silver’s demand profile may also benefit from the outrageous short position that exists in the silver COMEX market. The current “open interest” in silver COMEX contracts totals an approximate 871 million ounces! This means there are paper contracts for over 871 million ounces of silver that have someone betting “long” and someone else betting “short.” In the event that the “longs” choose to take physical delivery, there will not be enough silver to supply each buyer. It’s simple math – with only 684 million ounces of silver available above ground, there won’t be enough silver to go around. And considering the rate with which people have been purchasing coins and silver bars this past month, there may not even be enough physical to satiate regular spot buyers, let alone futures market participants.

“Considering all the recent developments in the silver market, it seems unlikely that the silver price will stay under $30/oz for long. The large quantity of money flowing into silver from investors, combined with the potential demand from those who are “short” silver that they do not own, will likely end up swamping the physical silver market entirely. . .We believe silver will be this decade’s gold, and judging by the recent price action, it’s already off to a great start.”

http://www.investmentrarities.com/comm_of_month12-29-10.shtml