SILVER - WAS $31-$49, WAS $33-$43, NOW $44+

[68Camaro]

Is price always real? No. When a party sells something they don't have and in quantities so large that the thing doesn't actually exist, at some point it becomes a fraudulent transaction. The short sellers are selling things they don’t have, which is tolerated to a point wih the assumptions that they will pay later. But when they purposely sell to control price by selling (things they don’t have and which don’t exist) in quantities so large they swamp the buyers, that is not a free market.

[Jonflyfish]

Is price always real? No. When a party sells something they don't have and in quantities so large that the thing doesn't actually exist, at some point it becomes a fraudulent transaction. The short sellers are selling things they don’t have, which is tolerated to a point wih the assumptions that they will pay later. But when they purposely sell to control price by selling (things they don’t have and which don’t exist) in quantities so large they swamp the buyers, that is not a free market.

I assure you that the price is real. When the counterparty owes me, they pay according the the valuation of the deal (contract) and vice versa. The financial market is financial. Yes there is an option at the end of the term for physical delivery. To this point, whenever delivery was demanded, it was delivered. If you don't believe that, go long Comex contracts then demand assignment for delivery at expiration. If it was that transparent, that the price was not "real", the arb traders would have raided that opportunity in a heartbeat, making it real.

Remember, the derivative market is "derived" from the physical. Don't believe the false rumor that derivatives set the underlying price.
It's real simple in the commodity industry. If I have the goods and I don't like the price, I don't sell until someone comes along with the price I agree to.
Now, ask yourself, can you set the price? Can a group of traders, who, in a zero sum market determine what price you are willing to accept? Nope.
But, you could always try calling APMEX and tell them that their prices are not real after the markets move lower and that you would prefer to pay a more realistic price- presumably higher since that is the angle of the dangle for anyone already long.

Cheers

[68Camaro]

Maybe we're quibbling over definitions, but it is absolutely possible for organizations with essentially unlimited resources (manufactured fiat, available without limit from FRB) to do whatever they want, at least in the short-term (months, even small numbers of years). They can crash the price by selling stuff that doesn't actually exist. They can then continue to postpone the need to deliver fully, by delivering partially, by paying people off, and by pushing the shorts out to further dates. Eventually (at least in normal world), it would catch up to them and it would all come crashing down. But their objective is to create panic, create loss of confidence in that market, and from that they would profit.

[timmus0382]

If SLV had one ounce physical for each share of SLV wouldnt that solve everything? Thats the way I think it should be, that seams fair in my book. Trading what you don't have is not fair. What would happen if everyone who owned shares of SLV all got together and wanted delivery all at the same time what would happen then?

How would this play out for the silver market and what would the price of physical go to? Its true value?

Why is the price of physical set by a system that isint fully backed by physical? Doesnt that leave room for speculation.

[Jonflyfish]

If SLV had one ounce physical for each share of SLV wouldnt that solve everything? Thats the way I think it should be, that seams fair in my book. Trading what you don't have is not fair. What would happen if everyone who owned shares of SLV all got together and wanted delivery all at the same time what would happen then?

How would this play out for the silver market and what would the price of physical go to? Its true value?

Why is the price of physical set by a system that isint fully backed by physical? Doesnt that leave room for speculation.

It all depends on the purpose and structure of the instrument. ETF's and ETN's are not the same as futures, nor the spot market. They have a management fee and have their own share NAV that trades at a premium or discount based on supply and demand for the shares. There is no physical mirror that is automagically reflective of the open auction for a commodity. It is an actively "managed" fund. Sprott has a 100% physical fund. Is his physical silver valued higher or lower than the prompt Comex futures contracts or spot market?

Price of physical is not set by any system other than the the physical market. It concerns me when people believe that commodity prices are set by anything other than an auction market.

[68Camaro]

If SLV had one ounce physical for each share of SLV wouldnt that solve everything? Thats the way I think it should be, that seams fair in my book. Trading what you don't have is not fair. What would happen if everyone who owned shares of SLV all got together and wanted delivery all at the same time what would happen then?

How would this play out for the silver market and what would the price of physical go to? Its true value?

Why is the price of physical set by a system that isint fully backed by physical? Doesnt that leave room for speculation.

In theory it should, and in theory SLV does. But SLV is just one of a number of ETFs, though the largest, not the COMEX itself. The problem is outside of SLV.

[Treetop]

as i understand it, there is multiples of the amount of silver traded on the comex, as well as various other sources. I dont buy the argument that this doesnt immensely alter the market. If all those dollars were in more direct one to one relationships with physical metal there would be many more dollars per ounce available. I rarely hear people say I want to buy XX ounces of silver, most say I want to buy XX dollars worth.

So theres multiples more "silver" being traded then exist and this doesnt affect the market? a sell off of it doesnt alter market perceptions? I dont care what you show me Id never believe it in a thousand years. Perhaps officially this isnt true, but in actual reality everythings interconnected, and many of those silver dollars would still be in silver at a one to one ratio. Meaning silver would be multiples.... I dont see how it could be any other way.

[beauanderos]

The price is real, all right. But it is not a genuine reflection of supply and demand... it is a CONTRIVED price engineered by naked short selling. When JPMorgan leaves hands off, the market bouys freely to the upside, gaining momentum as it does so. When "market movers" attempt to suppress the price (to the benefit of the govt which does not want the worthlessness of fiat revealed to the general public) of silver and gold, there are many tools they can draw upon. Via naked short selling they can and do overwhelm the buyers, driving down the "fixed" price of silver over and over again. All the while, real physical is being siphoned off into "strong hands" (whether those hands be individuals or sovereign wealth funds, matters not) until eventually there will be such a scarcity of silver, and concomitant outcry of silver miners, online dealers, and investors all demanding that a better system for price determination than we have at present be developed... that the present system will fall apart. Jon, you may be able to paper trade for profits within the present construct, but the milieu within which you trade is illusory, and dependent upon principled counterparties dealing with integrity. What happens, say, when the point of physical shortages becomes severe, forcing continuously greater CME margin hikes? When the available silver in COMEX decreases to the point where redemptions exceed the physical silver stored there... and longs are demanding delivery rather than bloated cash premiums to settle in cash? What happens when one massive counterparty, as Chinese officials have indicated they would, will not honor the derivatives they have until now backed? Another AIG? COMEX default? It is at that point that a high percentage of ETF holders, and owners of paper certificates of unallocated pooled accounts in any number of depositories will come to find there is no physical to back their redemption. This paper game can go on and on, if not in silver, than as today, by effecting a retracement in oil with a spillover effect into precious metals. Need to sell one? Affects them all. They want to effect the greatest good (to their intents and purposes) with the least collateral damage to the fewest players (hedgies and small investors) as possible. Meanwhile, as member Fed banks, the big players can play their games essentially without risk, knowing that their coffers will be refilled by the next bailouts... because they are "too big to fail."

[Jonflyfish]

If derivatives are "derived" from something, presumably and "underlying asset then why are they tagged as "manipulated" in a transparent open market auction?
More importantly, if one can imagine this to be true (if one knows real price discovery in an open auction they'll chuckle right about now) then why does the physical market "reflect" the non-credible, manipulated, BS derived prices, instead of some other more imaginable price?

Interesting to observe market psychology. When prices move higher in a market where the participants are naturally long, the uninformed minds believe that they are being granted wealth by some unknown charitable organization for their genius accomplishment, a a well deserving reward for being so smart. However, when things don't turn out quite so favorably, some conspiracy was enacted to steal from them. The reality isn't really real. It's a hoax. The game was rigged to confiscate their assets. Accountability for one's own actions taken and decisions made to participate in a marketplace isn't really theirs. Instead, they are victims, not of their own greed to make money, but from those greedy string pullers who must be wealthy banksters. It is all unbelievably wild and crazy because it seemed certain that there was a free trade to get that greedy bankster cornered and the bankster's supposed short position was supposed to get squeezed into submission without their ability to see it coming or do anything about it. In the end the pot of gold at the end of the rainbow was supposed to be confiscated from the greedy bankers and deposited into your account until the bankster did as they always do. )

[Jonflyfish]

I maintain that the rally of the USD may very well be the upcoming Realcent Black Swan event for reasons previously mentioned.
I'm not here to stir controversy or challenge anyone in particular. My views do tend to move against the grain. This often invokes the emotional types to react. To those folks, I apologize in advance. No harm intended.

Cheers

[beauanderos]

If derivatives are "derived" from something, presumably and "underlying asset then why are they tagged as "manipulated" in a transparent open market auction?
More importantly, if one can imagine this to be true (if one knows real price discovery in an open auction they'll chuckle right about now) then why does the physical market "reflect" the non-credible, manipulated, BS derived prices, instead of some other more imaginable price?

The physical market does reflect more imaginable prices. They're called premiums to spot.

[TXBullion]

If derivatives are "derived" from something, presumably and "underlying asset then why are they tagged as "manipulated" in a transparent open market auction?
More importantly, if one can imagine this to be true (if one knows real price discovery in an open auction they'll chuckle right about now) then why does the physical market "reflect" the non-credible, manipulated, BS derived prices, instead of some other more imaginable price?

The physical market does reflect more imaginable prices. They're called premiums to spot.

Which are intersting to watch too. As the price rises, the premium rises proportiantly. I figure on premium stuff like eagles, A premium seems to be about 10% . I got so used to a flat rate of 2 Dollars I thought it would stay like that forever

[Jonflyfish]

The price is real, all right. But it is not a genuine reflection of supply and demand... it is a CONTRIVED price engineered by naked short selling. When JPMorgan leaves hands off, the market bouys freely to the upside, gaining momentum as it does so. When "market movers" attempt to suppress the price (to the benefit of the govt which does not want the worthlessness of fiat revealed to the general public) of silver and gold, there are many tools they can draw upon. Via naked short selling they can and do overwhelm the buyers, driving down the "fixed" price of silver over and over again. All the while, real physical is being siphoned off into "strong hands" (whether those hands be individuals or sovereign wealth funds, matters not) until eventually there will be such a scarcity of silver, and concomitant outcry of silver miners, online dealers, and investors all demanding that a better system for price determination than we have at present be developed... that the present system will fall apart. Jon, you may be able to paper trade for profits within the present construct, but the milieu within which you trade is illusory, and dependent upon principled counterparties dealing with integrity. What happens, say, when the point of physical shortages becomes severe, forcing continuously greater CME margin hikes? When the available silver in COMEX decreases to the point where redemptions exceed the physical silver stored there... and longs are demanding delivery rather than bloated cash premiums to settle in cash? What happens when one massive counterparty, as Chinese officials have indicated they would, will not honor the derivatives they have until now backed? Another AIG? COMEX default? It is at that point that a high percentage of ETF holders, and owners of paper certificates of unallocated pooled accounts in any number of depositories will come to find there is no physical to back their redemption. This paper game can go on and on, if not in silver, than as today, by effecting a retracement in oil with a spillover effect into precious metals. Need to sell one? Affects them all. They want to effect the greatest good (to their intents and purposes) with the least collateral damage to the fewest players (hedgies and small investors) as possible. Meanwhile, as member Fed banks, the big players can play their games essentially without risk, knowing that their coffers will be refilled by the next bailouts... because they are "too big to fail."

With all respect, these are the same dated arguments that have been used for a long time by those who dream of the markets failing. The silver market is very small. If it was so obvious that all we need to do is raid the Comex and demand delivery, it would have been done long ago. Some small players believe that they know what is happening with the exchange and principal members as if they live in a fishbowl. they don't and I would not discount who the principals are, nor where they source their physical. Think about who the principal members are of the LBMA, the largest physical market on the planet, which is completely NOT transparent. Deals in silver are done there in terms of several tons, not a few pre '65 chips. There is no visible arbitrage in demanding delivery at the Comex for a well known price gap. Sorry. Not there. Am I saying that silver can't rally? Nope. Increasing margins at the Comex makes a lot of sense when you look at the intraday volatility and daily mark to market fluctuations that have been simply incredible, incredible! If some folks were over leveraged to the point where they were forced to reduce their effective leverage and had to liquidate some of their position- oops too bad so sad.

Look, we can theorize and imagine anything we want about anything. We can imagine that the Comex, or rather the CME Group/Nymex/Comex, in all their lax of genius, is about to fail and kiss pretty much all markets goodbye, or that beginning tomorrow there is an indefinite bank holiday that will begin because the Federal Reserve Bank of The United States of America, operating under the authority of the United States Congress, will have the epiphany that they are a really a sham, so they called it a day, boarded up the Marriner Eccles building and went home to let everyone fend for themselves. Does that mean that I believe a fiat currency by definition retains any intrinsic value? Nope.

[Jonflyfish]

If derivatives are "derived" from something, presumably and "underlying asset then why are they tagged as "manipulated" in a transparent open market auction?
More importantly, if one can imagine this to be true (if one knows real price discovery in an open auction they'll chuckle right about now) then why does the physical market "reflect" the non-credible, manipulated, BS derived prices, instead of some other more imaginable price?

The physical market does reflect more imaginable prices. They're called premiums to spot.

I have the spot prices at my disposal just like anyone. I don't see where the premium to spot is until you account for either
1- Numismatics i.e. eagles or
2- chopping up spot priced bars which are purchased at wholesale then machined into retail rounds and chips. As any refiner or round puncher will tell you- it takes a helluva lot more time and effort to make a thousand one ounce rounds than it does to pour a thousand ounce bar. I can buy 10,000 1k ounce bars at spot no problem. Premiums to spot are paid at the retail level. Nothing new there.

[Treetop]

So jonfly, you say silver is a small market. We all know that there are multiple dollars invested in silver in various ways then backs those investments. care to explain how this doesnt alter the markets?

I can only assume most of that money would still be in silver for the same reasons, and if it was wed have much higher silver.

How can mass selloffs in those over leveraged areas not affect price? your really not explaining yourself here if you think you are. Your just saying that isnt how it works.

And I take it you think JP organ truly think silver is over valued? At this point sure, many do.... but they have since it was much lower then it is now. Its gone up consistently, and its long term outlook with industrial demand expected to climb along with investment demand, implies its very likely to continue its climb, especially if the BRICS nations have their day..... and JP morgan think silvers a bad investment? So much that they bet the farm against it? I cant fathom that.

[Jonflyfish]

Tulving has 1000 oz bars in stock. Even buying only one bar it is only 0.49 over spot and that's the delivered price, not the FOB price on 10,000 bars.

[68Camaro]

Actually if you get that far into the process it says to call them for pricing...

[Jonflyfish]

So jonfly, you say silver is a small market. We all know that there are multiple dollars invested in silver in various ways then backs those investments. care to explain how this doesnt alter the markets?

I can only assume most of that money would still be in silver for the same reasons, and if it was wed have much higher silver.

How can mass selloffs in those over leveraged areas not affect price? your really not explaining yourself here if you think you are. Your just saying that isnt how it works.

And I take it you think JP organ truly think silver is over valued? At this point sure, many do.... but they have since it was much lower then it is now. Its gone up consistently, and its long term outlook with industrial demand expected to climb along with investment demand, implies its very likely to continue its climb, especially if the BRICS nations have their day..... and JP morgan think silvers a bad investment? So much that they bet the farm against it? I cant fathom that.

If the silver market isn't small then I am mistaken. If we are missing a few extra hundred million ounces that nobody knows about, then the market cap is only small instead of tiny.
I think there is a misunderstanding of what a derivative market is vs a physical. A financial derivative is an instrument that derives its price from an underlying asset. That is not a requirement to be backed by a physical, but to be derived from the physical. So, I ask how a group of crazies jumping up and down in a pit (real or virtual) flashing prices and contracting with each other in a ZERO SUM auction, can tell you what your physical metal is worth to an industrial buyer, jeweler or metal dealer? They can't. And why would you use what they do to determine your agreed upon prices unless there was no arbitrage because the ZERO SUM traders have correctly and efficiently derived the underlying prices in ways that you never could in a timely manner? The market is efficient. If it wasn't in a zero sum game then there would be free money to be made. The reason dealers use the financial markets as their base price is because it is liquid and efficient. Imagine going into the coin dealer and asking what his price was and how he would determine it vs some other coin dealer across the country. They use real prices from an aggregated, efficient market.

Another thought- The LBMA is the largest physical silver market. The noon fixing comes out. The ZERO SUM Comex futures market is the largest financial derivative market. If there is such an inefficient, manipulated discrepancy between physical and financial, why isn't there a free arbitrage in price?

[Jonflyfish]

Actually if you get that far into the process it says to call them for pricing...

So call him and find out for your self that he will negotiate even lower premiums on greater size, or FOB if you have to go to Newport Beach (what punishment!)
Better act quick though. He only has just over 450,000 silver ounces currently in stock.

[Treetop]

You pretty much ignored all my questions.

[Jonflyfish]

You pretty much ignored all my questions.

My apologies. Actually, the only question that i see that was missed (not ignored) was about JPM.
I have no idea what JPM's real position or strategy is, neither do you. I've heard the rumors. I've also heard much different rumors when meeting in London earlier this year with a principal member of the LBMA where JPM is also a principal member. In fact, it would not surprise me if a cargo ship showed up one day in the NY harbor full of silver to transplant into their new vault. That would cause a few to stand with their mouths agape. Is that a rumor? Is that what I believe will happen? Nope. I would not bet any farm on any rumor.
Don't get me wrong. I'm not here to say silver can't go up, BRICs or no BRICs. The future is unknowable.

[theo]

I don't prentend to understand all the ins-and-outs of this market, but I tend look at the question of market manipulation from a legal standpoint; in other words motive, means and opportunity.

First does the Government/banking system have a motive to control/suppress commodity prices? Absolutely! Governments have defrauded/stolen from their citizens throughout history. To think we are different because we are Americans is a little niave. The question is not whether the Government is stealing from us; the only question is how they are stealing from us. I think some sort of manipulation in the commodity markets is a good bet.

Next do the Government/banks have the means to manipulate the commodity markets? I think so. It could be JPM holding concentrated shorts, but perhaps JPM is merely a distraction while the actual manipulation is far deeper and more complex. I've heard about computer algorithms that are truly understood by a mere handful of people involved in trading. Remember last year's flash crash?

And finally opportunity. I think you've got me there! With our ever-vigilient watch dog media and our crack government regulators, Market manipulation is vitually impossible! Afterall they ran down Bernie Madoff after only 20 years.

[Jonflyfish]

as i understand it, there is multiples of the amount of silver traded on the comex, as well as various other sources. I dont buy the argument that this doesnt immensely alter the market. If all those dollars were in more direct one to one relationships with physical metal there would be many more dollars per ounce available. I rarely hear people say I want to buy XX ounces of silver, most say I want to buy XX dollars worth.

So theres multiples more "silver" being traded then exist and this doesnt affect the market? a sell off of it doesnt alter market perceptions? I dont care what you show me Id never believe it in a thousand years. Perhaps officially this isnt true, but in actual reality everythings interconnected, and many of those silver dollars would still be in silver at a one to one ratio. Meaning silver would be multiples.... I dont see how it could be any other way.

You'll never believe this as you already said, but the derivatives market is not, not has it ever been a 1:1 allocated or unallocated physically backed market. It is a financial product that "derives" the price of the financial contract from the underlying price of the silver market".
I also trade spot prices as an OTC financial contract that mirrors the spot market. It is not fungible or convertible to physical.

[Treetop]

You also missed the question about all those leveraged dollars invested in silver. You admitted its a small market. We know that many if not most dollars invested in silver are not at a one to one ratio. so doesnt it stand to reason that most if not all of those dollars would still be invested in silver if the market wasnt heavily leveraged? If it was the price would be much higher especially considering the small size of the market....

you didnt exactly answer how the trade of all this leveraged silver doesnt alter price either. You basically just used a lot of words to say it doesnt. I fail to see why ALL players arent driving the markets, besides just the industrial guys (miners and manufacturers) The price is made through several factors one of which is availability of said commodity to invest in. through leveraging there is simply more invested in silver then there is silver, yet this doesnt alter price?

If I could sell the same piece of land to 10-20 speculators, who all had the option to officially buy this piece of land.... the price might reflect some standard market price, but if an auction was held between these 10-20 folks so only one of them could hold the title, Im positive one would outbid the rest. If all the same dollars were somehow invested into the single claim, it would then reflect that. Just as I would assume if there was a one to one ratio of silver per dollar invested into silver, rather then the leveraged markets we have now, it would reflect that higher level of investment per amount of silver. Its simple math. with silver this doesnt happen. Most dont need or want physical metal, they trade its value on paper. On paper theres simply more silver then could be delivered. Your not accounting for any of this in your explanations, and if you are I totally missed it.

the third point is that the paper silver not only waters down the actual silver which is undeniable imo, but that the paper trade can further alter price by mass sell offs and other such things. Your saying if everyone sold their paper silver today, no matter the price that silvers value would be unaffected? I cant imagine thats even remotely close to true.

All that said, I think its clear you know your stuff as a day trader.... I just think your seeing what you expect to see here though.

[Jonflyfish]

I don't prentend to understand all the ins-and-outs of this market, but I tend look at the question of market manipulation from a legal standpoint; in other words motive, means and opportunity.

First does the Government/banking system have a motive to control/suppress commodity prices? Absolutely! Governments have defrauded/stolen from their citizens throughout history. To think we are different because we are Americans is a little niave. The question is not whether the Government is stealing from us; the only question is how they are stealing from us. I think some sort of manipulation in the commodity markets is a good bet.

Next do the Government/banks have the means to manipulate the commodity markets? I think so. It could be JPM holding concentrated shorts, but perhaps JPM is merely a distraction while the actual manipulation is far deeper and more complex. I've heard about computer algorithms that are truly understood by a mere handful of people involved in trading. Remember last year's flash crash?

And finally opportunity. I think you've got me there! With our ever-vigilient watch dog media and our crack government regulators, Market manipulation is vitually impossible! Afterall they ran down Bernie Madoff after only 20 years.

If one believes that the small silver market is worth the effort of the government to manipulate as a means of stealing from its citizens, it would be difficult to impossible to pull off. First, it is a tiny market. What is the opportunity to the government in such a small market? Because it is so small, relatively low volumes push the price when the order imbalance comes in. How would the government rob a nation doing this? Who are they stealing from and what is the $ value relative to the $trillions that they need and can find elsewhere? Ultimately, if one truly believed that the tiny silver market is in a perpetual suppression that somehow benefits them to rob a nation then it is pretty easy to front run their orders in the tiny market and make them look like donkeys.