Silver: Gap Between Paper and Physical Prices Widening Daily

We were out for most of the day yesterday, so, I called into California Numismatics' 24-hour toll free recording to find out what happened in precious metals markets. What I heard was quite shocking and the chart below only tells half the story of how the gap between paper prices and physical prices is widening almost daily.
What you see above is the CNI buy price for 100 ounce silver bars going back more than two years - obviously, things have changed quite dramatically in just the last month or two, a trend that was set in motion in March of this year around the time that Bear Stearns was rescued.

The gap between the price of 100 ounce silver bars and "paper" silver is now around two dollars an ounce!

That's if you want to sell your silver to them.

If you want to buy silver, well, that's been pretty difficult lately as they've been out of 100 ounce silver bars for some time now. But, apparently they've located some one-ounce silver rounds that they'd be willing to sell to you ... for four or five dollars over the spot price!

Of course, in futures markets today, silver was pummeled once again, down almost a dollar to just over $10.

Amazing...

Comments

[johngonole:]

Wondering why SLV is trading even below the paper. Is someone shorting it?

2008 Oct 16 03:39 AM

[johngonole:]

One more comment. Silver now seems to be trading with the commodities. However the demand spike is on the refined silver side of things. With copper and other base metal prices sinking I'd expect slower mining production and hence also less silver production. If there is indeed a real shortage of silver the supply side couldn't tighten even further if the other metals are mined less since silver is a by product of these mines.

2008 Oct 16 03:42 AM

[KNAB:]

I'm in silver for the worst case inflation scenario. The drop in global demand in the short-term is going to drop silver, but I am not concerned about this. If the U.S. economy shapes up to be the seventies again, with stagflation, there seems to be some likelihood of a spike; the sharpness of that spike seems to be pegged to what the global demand situation will look like. It seems like, drawing from this article, that some banks, like the Bundesbank "get it" more than our Fed does; if our economy swings down that will drop demand on some world commodities, lowering prices for other state economies to buy commodities for use in their industries. This will increase demand, and silver might be in a better position vis-a-vis what I imagine our dollar will look like about two years out - weak and not the currency of choice.

2008 Oct 16 05:53 AM

[GMiki1:]

Crazy, crazy, crazy. And the mint has stopped producing silver eagles. Wowzer. Silver is going down again today--unless you want to buy it. When this thing breaks loose... !!! And energy... AND copper because China is only going to grow by 9 percent next year and build a few cities. Can you say deleveraging... Getting out and going home to hide under the covers until their own homes are foreclosed on. And I mean the investment bankers and hedge fund managers, the ones who have been gaming the system.

2008 Oct 16 09:35 AM

[dieuwer:]

1+1=2
COMEX will default, sooner rather than later

2008 Oct 16 11:24 AM

[jhm47:]

I went to a large coin/metals dealer in Fargo the other day. They are totally out of silver, and don't know when they will get any. They plan to take delivery of some contracts. This "squeeze" will even out someday, and possibly not too far in the future.

2008 Oct 16 11:34 AM

[gatoralsoccer:]

In the late '70's/early '80's, a gulfside restaurant in Clearwater, FL had a Sunday brunch for $4.95 or 40 cents in silver coins. Might we see another dual currency pricing in the not to distant future?

2008 Oct 16 01:00 PM

[MC dk:]

Cheers to those who can see the Fed bluff.

My Dealer here in Denmark, is finally seeing less sellers comimg in to the shop, and he can sell anything metalic.
NO boby is selling silver at 9-12$.

Shorting resources is stealing from the countries of Africa & South America,russia & Opec.
It looks like a coming REalignment of currency's soon.
Us$ down or china won UP.

BUT will bush...LEAVE the White house....??
HE cheated to get in, so I predict, that he will....STAY....
That should send silver down to 2$ and put gold on the ANTI patriot list.

hang on there, for a wild ride.
Mc

2008 Oct 16 01:26 PM

[Mr.G:]

I read an article about this yesterday for gold on seeking alpha it was his suggestion to take delivery on mini nyse contracts -his point being they are small enough for investors to take delivery you pay spot - he had a list of brokerages who could handle this on a link -
I know MFglobal handles delivery of commodities but I have no idea of whats involved -and as dieur said - I am not even sure the metal is deliverable at this point -
The one thing that perturbs me is hedge funds pretty much liquidated the paper they were rolling from month to month to cover losses or exits from funds -I am wondering if many retailers are holding inventory which was bought at higher prices and are creating a false sense of none- I know that is playing devils advocate but has been done in the past in ag grains at harvest -they wait for prices to come up then dump all at the same time pushing prices downward -with metals it could be done incrementally where as in ags -the product goes bad

2008 Oct 16 01:52 PM

[Mr.G:]

what I state probably is not likely but possible

2008 Oct 16 01:52 PM

[Mr.G:]

also I can get all the silver I want for $20/ounce -but I cant help but feel I am being ripped off

2008 Oct 16 01:55 PM

[deuxsous:]

It's a mania in silver and gold,,,,or was until today. Two days ago CEF was trading at a 21% premium to the gold and silver they hold. And the gold and silver coin shops are doing the sdame thing: fleecing the willing maniacs. :)

2008 Oct 16 02:12 PM

[jimmie777:]

CFTC - Investigation a shame.

Ted Butler - news.silverseek.com/Te...

one or two large US banks have a very large short position.
Will COMEX go out of business?

hmmm.....

2008 Oct 16 03:15 PM

[Dr. Dancer:]

I don't understand the disconnect. If it is $9 an ounce in the paper market then it should be $9 + commission in my coin shop. If people are willing to pay more in physical, then the paper number should reflect it. That is called demand, end of it. We need to slap ourselves, we are victims of cognitive dissonance. The article above and many more like it are attempts to make sense out of the senseless.

THERE IS MUCH MORE WRONG THAN WE HAVE THE COURAGE TO INVESTIGATE.

2008 Oct 16 09:52 PM

[directcommu...:]

it's an easier way to make alimit order and strategically enter into a silver position

2008 Oct 17 03:10 AM

[SW Richmond:]

"one or two large US banks have a very large short position.
Will COMEX go out of business? "

Personally, I am hoping so, especially if they take said banks out with them. But I am a realist. Where do you think that $700 Billion bailout went? Has anyone noticed the renewed strength of PM shorting since then?

2008 Oct 17 07:02 AM

[Roger Meadmore:]

A Midas article recently quoted someone as saying America found a vast hoard of gold in the Philipines looted from invaded countries by the Japanese in World War II. I think the figure was something like 10 times the 35,000 tons the central banks still clain to have which Bill Murphy says is half gone. May be this is where their seemingly limitless supply is coming from to suppress the price.
After all, if they are merely "spoils of war" nobody has really worked to earn them (other than a few thousand good men who died in the event) and the theft (from the real owners - the countries looted from) has never been disclosed (until now by Le Metropole Cafe) and so almost limitless gold is being used to suppress the price. Curiouser and curiouser, said Alice.

I'd like a comment on this as it may have an horrific bearing on how low the bastards can continue to go.

2008 Oct 17 08:35 AM

[Digitalhermit:]

This situation is absurd. Retail prices on 1000oz COMEX bars are between 12-14$ per ounce. Whoever is shorting silver at < $10 oz is going to have to make delivery in some cases by entering the market and buying at the market rate for the real metal.

Someone explain to me how these shorts can avoid taking a huge loss that will only grow as the price of the real metal (not paper) increases?

2008 Oct 17 12:10 PM

[counslr2003:]

I'm not sure where the data is coming from, but I don't see SLV trading at that big a discount. SLV holds real 1000 oz bars so if anything, it should be trading at a premium to paper spot. The small discount is due to the maintenance charges by the trustee which over time will get very slightly larger, but only a miniscule amount.

2008 Oct 17 02:36 PM

[Alex Stanczyk:]

History repeats, reminds me of the London Gold Pool.

www.rapidtrends.com/bl.../

2008 Oct 17 04:12 PM

[ARYA MENSA ...:]

In THE PROTOCOLS...they brag how they will rip YOU off...and then, they tell YOU how to protect yourself...so, if YOU have not read THE PROTOCOLS...then YOU deserve to be ripped off....

2008 Oct 17 04:55 PM

[Ahab:]

That's the notorious forgery 'Protocols of the Elders of Zion' I presume. Last I saw that was 45 years ago being waved in social science class by the son of an (ex) nazi migrant. Ironically it was a fairly accurate account of national czarist and later Nazi party modus operandi, and attributing it to their powerless victims was the great 20th century triumph of the absurd.

2008 Oct 17 07:28 PM

[DrZero:]

Oh, please! Grow up. Bush didn't steal the election. It was very close, he won the toss-up. Gore did just as much underhanded stuff in Florida as Bush - selective recount petition while claiming he wanted to "count all the votes", trying to exclude military absentee ballots, appealing election rules to the all Dem Florida S.C. etc.

Bush is going to leave office on Jan 20 just like all the President's before him.

It's hard to take anything else you say seriously when you write junk like that.

2008 Oct 22 08:42 PM

[silver-bullet:]

THERE IS A PLACE WHERE YOU CAN GET LOTS OF SILVER. IT IS CALLED....

......................... C O M E X .........................

Buy a mini silver contract from COMEX (1000 oz), and TAKE DELIVERY.

Do not wait till December, when more trade is made in silver in COMEX, because there may be none left and COMEX may default.

Buy it now, and take delivery in October and November.

For those of you who wants to make a quick buck, this is the perfect arbitrage play to take advantage of the price differential between the paper and physical silver market.

2008 Oct 26 12:29 AM