Significant Silver Withdrawals from COMEX 63 comments
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Ending last week with nearly 119 million ounces of silver (Moz) in the four COMEX depositories, this week the word has been get your silver while you can. Slightly less than 2 million ounces of silver has been withdrawn from COMEX stocks in three days (July 6-8), with eligible silver dropping from 55.4 Moz to 53.5 Moz. Significant withdraws were experienced by HSBC Bank (HBC) (down 1.26 Moz) and Sottia Mocatta (down 546,000 oz). Brinks also registered a withdraw of 30,000 oz of silver. The reduction is only 2% of total stocks that COMEX claims, however it is nearly 5% of eligible stocks that can be used for futures redemption. The remainder is registered, but is already allocated (owned) by other investors who are storing it in the vaults.
COMEX futures contracts however have been let for 429 Moz as of July 6 (vs 53 Moz of "eligible" silver in the vaults. If you add the future spreads, then COMEX has 522 Moz of contracts out vs 53 Moz of silver to cover those contracts.
For leverage fans, that is 10 oz of silver under contract for every ounce of silver available. If you count the fact that COMEX allows you to purchase a contract with 10%, then actual leverage vs physical metal held by COMEX is closer to 100 to 1.
That should answer the question as to why someone would refer to it as "paper" silver. It should also generate a question as to why so much silver is starting to flow out of the COMEX.
DIsclosure: Long GLD, SLV, retirement accounts, some physical metals
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This article has 63 comments:
I think we are about to enter a surreal situation where the spot price will be about $12 an ounce, only you can't have any at the moment.
Then the CTFC will blame market distortions on speculators and force all contracts to be cash settled....
Thanks.
The hedged trader doesn't care which way the market goes. They have no vested interest in "trying to slap the market down". The spec shorts do, but a "Commercial Trader" is NOT a spec. Check out the CFTC website if you don't believe me.
And the Mint has plenty of silver eagles.How many boxes of '09's do you want at $2.10 over spot???
On Jul 10 05:26 PM tigertom wrote:
> The problem is 4 or less large commercial traders, including at least
> 1 or 2 large US banks (from CFTC's own Commitment of Traders and
> Bank Participation reports) control upwards of 70% of the short side
> of the entire COMEX silver and gold futures markets (after subtracting
> all spreading positions). Is that bogus or what? They're the ones
> tryong to slap the price down. Why isn't the CFTC doing something
> about it? In their hayday, the Hunt bros never controlled more than
> 5-10% of the long side. Evidence suggests JPMorgan/Chase is one
> of these large short side traders, initially by virtue of their takeover
> of BearSterns. Since the Fed "guaranteed" JPM's losses on the BearSterns
> takeover, does that mean the Fed, US Treasury and CFTC are all "in
> cahoots" with them? Any why has the US Mint stopped selling silver
> eagles?
It a case of a classic short side manipulation. Have you ever noticed that major downside moves in silver rarely, if ever, occur during normal trading hours? To paraphrase Ted Butler, the concentrated shorts wait until the most opportune time, typically after hours when markets are thinly traded, and throw in some relatively small but aggressively placed sell orders. These sell orders cause the price to fall, touching off further sell orders from under-margined longs, which further causes prices to fall. It' similar to rolling a small snowball down a hill and watching it pick up size and momentum. As the sell orders began to snowball more and more, guess who was buying after prices dropped? The same concentrated shorts. They've been doing this time and again for the better part of 20 years and gotten away with it. And in what other commodity does the CFTC allow 4 or fewer traders (commercials, non-commercials, or otherwise) to control 7 times annual US production? Silver investors are being had.
The good news, however, is that every manipulation sows the seeds of its own demise. If the CFTC doesn't stop it first (unlikely), it will end when COMEX runs out of silver and/or there are inordinate delays or outright defaults on contract deliveries. Ed Zimmer has it right.
That whistle you hear in the distance is a train that's coming. Just wait, it will be here shortly. And with it, it will be bringing speed, power, and chaos! That train is sheeple morphed back into people and they are getting smarter by the second when it comes to getting ripped off with PAPER silver! The COMEX and JPM, HSBC, and others will be sucking wind!
My safes are filled to the max. I've planned, because I have been through this before. Once burned... well, you know the story. God bless all you posters! Buy PHYSICAL silver (and gold).
So store silver in London, hedge it in NY and keep rolling the position.
They are also hedging future production from producers. It's how many of the smaller miners get their financing.
Look, if you want to believe all the conspiracy theory stuff, that's OK with me. I'm long lots of silver too. But after trading and dealing silver and gold for 3 decades I've seen how the market works, who the players are and what they can do.
Yes, it's easy to run thin markets. But COMEX is not the entire world stage for metals. It trades 23 hours a day, almost 6 days a week. Sure, the name of the game is to push people out of weakly held positions. That happens in ANY market.
You can believe the folks who think some big cartel is controlling gold and silver and you can buy the precious metals and I believe you will be rewarded.
But do a little digging into how the international precious metal market works and I think you'll find it a lot less sinister than you beliveve.
On Jul 11 12:06 PM tigertom wrote:
> I strongly disagree that the commercial traders don't care which
> direction prices go. According to recent CFTC COT reports, 4 or
> fewer COMEX "commercial" traders (their term, not mine) are collectively
> net short approx 50,000 contracts or 250 million ounces of silver.
> There's no way they could control that much physical silver. That's
> roughly 7 times annual US production (approx. 36 MM oz/yr); 35-40%
> of annual world production, and more than double what's currently
> in COMEX warehouses, registered and eligible combined. For every
> $1 these concentrated shorts can beat silver prices down, they're
> $250 MM to the good (at least for the moment). When the price of
> silver doubles or triples (at least), which it eventually will when
> folks realize 90+% of the silver that's ever been mined has been
> used up and current above ground stocks are rapidly being used up,
> these large shorts will be hung out to dry. Of course it's in their
> interests to keep silver prices as low as possible for as long as
> possible. It doesn't take a lot of gray matter to see that.
>
> It a case of a classic short side manipulation. Have you ever noticed
> that major downside moves in silver rarely, if ever, occur during
> normal trading hours? To paraphrase Ted Butler, the concentrated
> shorts wait until the most opportune time, typically after hours
> when markets are thinly traded, and throw in some relatively small
> but aggressively placed sell orders. These sell orders cause the
> price to fall, touching off further sell orders from under-margined
> longs, which further causes prices to fall. It' similar to rolling
> a small snowball down a hill and watching it pick up size and momentum.
> As the sell orders began to snowball more and more, guess who was
> buying after prices dropped? The same concentrated shorts. They've
> been doing this time and again for the better part of 20 years and
> gotten away with it. And in what other commodity does the CFTC
> allow 4 or fewer traders (commercials, non-commercials, or otherwise)
> to control 7 times annual US production? Silver investors are being
> had.
>
> The good news, however, is that every manipulation sows the seeds
> of its own demise. If the CFTC doesn't stop it first (unlikely),
> it will end when COMEX runs out of silver and/or there are inordinate
> delays or outright defaults on contract deliveries. Ed Zimmer has
> it right.
Oh, and Commercial shorts are only 37,000 lots.
But that’s not all. The report also says the 8 largest commercial net shorts hold 57.6% of the total short open interest. That means the 8 largest short-side commercial traders are net short 57,817(+/-) contracts (57.6% x 100,376). Since the commercial traders as a group are only net short 37,432 contracts, then the remaining “9+” commercial traders (all other reporting commercials as a group) have to be net long 20,385(+/-) contracts. Subtract that from the 29,798 long interest positions reported by the commercials as a group and the resulting 9,413 (+/-) contracts represents the spread positions held by all reporting commercial traders as a group. Now combine that with the 19,476 reported spread positions controlled by the reporting non-commercial traders and that says the total “reported” spreading positions are 28,889(+/-). Next, subtract that from the reported 100,376 open contracts and the result, 71,487(+/-) contracts, is the “true” open interest, i.e., after subtracting reported spreads. (Actually, this number would be even less if one considered the spreading positions controlled by the “non-reporteds”.) Finally, divide the 49,887 (+/-) short contracts held by the 4 largest commercial shorts by 71, 487(+/-) “true” open positions, and one can see that the 4 largest commercial shorts actually control at least 69.8% of the short side of the entire COMEX silver market after subtracting spreads; and the 8 largest actually control at least 80.9%. (And both of these percentages would actually be even higher if non-reported spreads were considered).
If this isn’t “over concentration” by a small group of traders, one of the very definitions of manipulation, then I don’t know what is.
My other point is, if you’re going to invest in silver and you use or refer to the COT reports, don’t simply take them at face. Learn how to read “between the lines” and see what they’re really saying. I must give Ted Butler credit for teaching me that.
But that doesn't negate the fact, as provided by the CFTC, that COMMERCIAL traders are hedgers. I
If they are not hedgers, they get included in the NON-COMMERCIAL category. That's where hedge funds and speculators get reported.
Someone needs to explain to me how a hedger, who is long physical and short a futures contract, benefits from a "manipulation" of the price of silver.
This isn't my definition of a Commercial Trader, it's the CFTC and COMEX definition. They are hedgers.
On Jul 12 01:41 PM tigertom wrote:
> Do the math. According to most recent COT report for COMEX futures
> only (report of 7/10/09 for positions as of market close on 7/7/09),
> total reported commercial long interest was 29,798 contracts. Total
> reported commercial short interest was 67,230. True, the difference
> is 37,432 net short contracts for all reported commercial traders
> as a group (which, I assume, is the 37,000 figure cited above by
> kohalakid). But that’s not the whole story. The report also states
> the 4 largest commercial net short positions hold 49.7% of the total
> short open interest. 49.7% x 100,376 open contracts = 49,887(+/-)
> short contracts held by the 4 largest commercial shorts. Hence the
> 50,000 number I referred to previously.
>
> But that’s not all. The report also says the 8 largest commercial
> net shorts hold 57.6% of the total short open interest. That means
> the 8 largest short-side commercial traders are net short 57,817(+/-)
> contracts (57.6% x 100,376). Since the commercial traders as a group
> are only net short 37,432 contracts, then the remaining “9+” commercial
> traders (all other reporting commercials as a group) have to be net
> long 20,385(+/-) contracts. Subtract that from the 29,798 long interest
> positions reported by the commercials as a group and the resulting
> 9,413 (+/-) contracts represents the spread positions held by all
> reporting commercial traders as a group. Now combine that with the
> 19,476 reported spread positions controlled by the reporting non-commercial
> traders and that says the total “reported” spreading positions are
> 28,889(+/-). Next, subtract that from the reported 100,376 open
> contracts and the result, 71,487(+/-) contracts, is the “true” open
> interest, i.e., after subtracting reported spreads. (Actually, this
> number would be even less if one considered the spreading positions
> controlled by the “non-reporteds”.) Finally, divide the 49,887 (+/-)
> short contracts held by the 4 largest commercial shorts by 71, 487(+/-)
> “true” open positions, and one can see that the 4 largest commercial
> shorts actually control at least 69.8% of the short side of the entire
> COMEX silver market after subtracting spreads; and the 8 largest
> actually control at least 80.9%. (And both of these percentages
> would actually be even higher if non-reported spreads were considered).
>
>
> If this isn’t “over concentration” by a small group of traders, one
> of the very definitions of manipulation, then I don’t know what is.
>
>
> My other point is, if you’re going to invest in silver and you use
> or refer to the COT reports, don’t simply take them at face. Learn
> how to read “between the lines” and see what they’re really saying.
> I must give Ted Butler credit for teaching me that.
On Jul 12 10:03 AM liam mateer wrote:
> for the guy who thinks the comex is not rigged, 4 huge comercials
> with short such a large position is illegal. The fact they have been
> allowed to get away with a huge crime for 20 years is enough to confirm
> a cartel with links to the government with nothing else to anyone
> who supports the shorts(the gov admits it has people who blog for
> them the guy above is probably one or a just a liar). The comex is
> fixed, the ppt also do this world wide. anyone who says otherwise
> is a damn liar that means you tigertom above
In addition, we know central banks seek to influence the price of gold and probably silver and why. If they are trading with a bank in OTC format, the bank hedges the position with futures, and therefore this is hedging, but there is no physical underlying involved if the OTC contract is a cash settled one (which is more likely).
On Jul 12 03:54 PM kohalakid wrote:
Your numbers may all be correct. But that doesn't negate the fact, as provided by the CFTC, that COMMERCIAL traders are hedgers. I
>
> If they are not hedgers, they get included in the NON-COMMERCIAL
> category. That's where hedge funds and speculators get reported.
>
>
> Someone needs to explain to me how a hedger, who is long physical
> and short a futures contract, benefits from a "manipulation" of the
> price of silver.
>
> This isn't my definition of a Commercial Trader, it's the CFTC and
> COMEX definition. They are hedgers.
>
> On Jul 12 01:41 PM tigertom wrote:
Let’s say (hypothetically), I was to accept your premise that every short silver contract sold by the COMEX commercial futures traders was backed by either physical silver or bona fide anticipated future production (on or before the respective contract settlement date, of course). Perhaps, in a perfect world, that’s the way things are “supposed” to be; but are they really? Most reputable silver analysts I know are quick to concede that the likelihood of that much physical silver being currently available above ground (and particularly at current prices) is either virtually impossible or extremely improbable at best. So on that basis, a very substantial portion of it would have to forward selling of future production.
Most are also quick to point out that current prices levels ($12 to $13/oz) are substantially below the average cost of production for the vast majority of silver producers. However financially squeezed they may be, it makes little sense that so many producers would be willing to forward sell all, or significant portions, of their forward production at prices below their production costs.
Secondly, supply/consumption/inv... demand/inventory fundamentals all strongly suggest that we are rapidly depleting the available worldwide above ground supplies – meaning that a silver shortage is looming in the not too distant future that will likely cause prices to rise to several multiples of current levels. Again, if I owned that much physical metal and/or the ability to produce it, why would I be so quick to want to sell it at current price levels? Is an oil producer going to forward sell his crude production a year or more out at $50 or even $60/bbl when there’s every expectation that, by the time it’s produced, it could be going for between 2 and 5 times that? And especially if his cost of production is above current prices?
Thirdly, about 60% of worldwide silver production is a by-product of producing other base metals – typically copper, nickel, zinc, etc. With the worldwide recession, the demand for these other base metals has been significantly curtailed resulting in numerous mine closings and production cutbacks. If I owned such a mine, and had forward sold the silver production, and have since had to shutter the mine, I’m going to be forced to either buy those contracts back or buy silver from other sources to settle those contracts. Are you saying it’s not in my interest to be able to buy those contracts back and/or physical metal at a lower price than I originally sold it for?
And finally, suppose I was sitting on a substantial hoard of physical metal and had and contracted to sell it (via futures) for, say $15/oz. Why wouldn’t it be in my interest to see prices decline so that I could buy those contracts back at lower prices (pocketing the difference), keep my silver, and then sell it again down the road when prices go back up? And if I could once, why wouldn’t I want to try to do it again? And again? And again?
So even if all the commercial shorts were backed by physical metal or forward production, how can you say ‘The hedged trader doesn't care which way the market goes.’???
You have made a valiant effort to enlighten and educate. It HAS helped!...and thank you!
Please go to the CFTC website cftc.gov
Click on the right under Explanatory Notes and read the CFTC definition of a Commercial Trader. Being a Commercial Trader has advantages for the trading entity. Lower margins for bona fide hedge trader being a MAJOR benefit. Additionally, when you sign an account application as a HEDGE Account, you represent that your trades are hedges and that you will alert your broker if you are trading something that is not hedged.
I have been a hedge trader for 30 years, holding physical metal and hedging it via futures. Does that mean I never speculate??
Of course not. I speculate plenty, both long and short. But the COMEX has a big reason to make sure hedge traders are actually hedging. It's the initial margin. The exchange makes a good percentage of its income on interest on the margin deposits. Hedge traders pay a MUCH lower margin rate because the exchange perceives them as lower risk than a spec trader. So it's actually in the exchanges' interest to have more classified as Non-commercial and get the higher margin rates. The exchange earns more and believe me they are not a non-profit organization.
As far as whether the hedger is hedging physical or another forward position dealt to him by someone else, that's not a distinction the COMEX or the CFTC seems to make. They are hedging commitments as well as physical. That's the way the market works.
I have filled out reporting forms for my positions in Gold and Platinum...never for silver..and have been recorded as a Commercial Trader. I've had calls from the CFTC regarding my positions in platinum. I lived this stuff, not just read some conspiracy theory from folks trying to sell newsletters.
On Jul 12 05:28 PM nobby73 wrote:
> Sorry, but this doesn't hold up. That these banks are assigned commercial
> trader status, does not mean they have to be hedging. A precious
> metal trader does not keep 2 books, a hedging book and a non hedging
> book, so it is pretty near impossible to state that the commercial
> traders are hedgers.
>
> In addition, we know central banks seek to influence the price of
> gold and probably silver and why. If they are trading with a bank
> in OTC format, the bank hedges the position with futures, and therefore
> this is hedging, but there is no physical underlying involved if
> the OTC contract is a cash settled one (which is more likely).<br/>
> Your numbers may all be correct. But that doesn't negate the fact,
> as provided by the CFTC, that COMMERCIAL traders are hedgers. I
In essence, I agree with your first paragraph.
Your second paragraph concerns silver producers and when they may sell their forward production. Many producers find it easier to get bank financing when they have locked in forward commitments to sell their silver. And just because silver is $13 now doesn't mean that the Commercial short positions are from $13. They could be from $20, getting rolled every 3 months. That's why so much selling occurred at higher prices. The producers you described, both primary and secondary producers, locked in prices at higher and higher numbers providing supply to offset speculators. Some of this material can be sold 3 or 5 or more years forward.
Your third and fourth paragraphs again concern when producers would sell. Some don't want to speculate on higher prices. They hedge at numbers that provide them a profit and are happy with that. If they are secondary producers and close a copper mine for instance they can roll their silver commitments forward as long as they need. It's all part of the bullion banking business.
Your fifth paragraph assumes, wrongly I believe, that many of these bullion banks and dealers take HUGE positions one way or the other. They don't need to. They are working on hundreds of million of dollars and grinding out a few percentage points of return after financing costs translates into nice, consistent profits. I've run a small, hedged precious metals book for a long time and yes, I take spec positions both long and short. But the steady, long term profits come from grinding it out. That's how a lot of these firms have been around for hundreds of years. If you understand the concept of financing costs vs. contango you'll see the long term win for them is in scalping the basis spreads on physical vs futures/forwards.
I'm sure not telling anyone to sell their precious metals.
I'm long a fair bit now. But I hate seeing people on here with unreasonable expectations of what these metals can do. I'd love to see silver at $30..but I don't think it will happen soon. I'd rather sell $12.50 puts month in and month out and sell $15 calls when it fits.
It's worked well for me for 30 years.
On Jul 12 06:30 PM tigertom wrote:
> Reply to kohalakid:
>
> Let’s say (hypothetically), I was to accept your premise that every
> short silver contract sold by the COMEX commercial futures traders
> was backed by either physical silver or bona fide anticipated future
> production (on or before the respective contract settlement date,
> of course). Perhaps, in a perfect world, that’s the way things are
> “supposed” to be; but are they really? Most reputable silver analysts
> I know are quick to concede that the likelihood of that much physical
> silver being currently available above ground (and particularly at
> current prices) is either virtually impossible or extremely improbable
> at best. So on that basis, a very substantial portion of it would
> have to forward selling of future production.
>
> Most are also quick to point out that current prices levels ($12
> to $13/oz) are substantially below the average cost of production
> for the vast majority of silver producers. However financially squeezed
> they may be, it makes little sense that so many producers would be
> willing to forward sell all, or significant portions, of their forward
> production at prices below their production costs.
>
> Secondly, supply/consumption/inv... demand/inventory fundamentals
> all strongly suggest that we are rapidly depleting the available
> worldwide above ground supplies – meaning that a silver shortage
> is looming in the not too distant future that will likely cause prices
> to rise to several multiples of current levels. Again, if I owned
> that much physical metal and/or the ability to produce it, why would
> I be so quick to want to sell it at current price levels? Is an
> oil producer going to forward sell his crude production a year or
> more out at $50 or even $60/bbl when there’s every expectation that,
> by the time it’s produced, it could be going for between 2 and 5
> times that? And especially if his cost of production is above current
> prices?
>
> Thirdly, about 60% of worldwide silver production is a by-product
> of producing other base metals – typically copper, nickel, zinc,
> etc. With the worldwide recession, the demand for these other base
> metals has been significantly curtailed resulting in numerous mine
> closings and production cutbacks. If I owned such a mine, and had
> forward sold the silver production, and have since had to shutter
> the mine, I’m going to be forced to either buy those contracts back
> or buy silver from other sources to settle those contracts. Are
> you saying it’s not in my interest to be able to buy those contracts
> back and/or physical metal at a lower price than I originally sold
> it for?
>
> And finally, suppose I was sitting on a substantial hoard of physical
> metal and had and contracted to sell it (via futures) for, say $15/oz.
> Why wouldn’t it be in my interest to see prices decline so that I
> could buy those contracts back at lower prices (pocketing the difference),
> keep my silver, and then sell it again down the road when prices
> go back up? And if I could once, why wouldn’t I want to try to do
> it again? And again? And again?
>
> So even if all the commercial shorts were backed by physical metal
> or forward production, how can you say ‘The hedged trader doesn't
> care which way the market goes.’???
Let me toss out a few numbers. The Comex "short" positions and the silver bullion-ETF's (i.e "paper" silver) BY THEMSELVES account for 120% of total global "inventories" of 600 million ounces (according to inventory data from the CPM Group). That doesn't even BEGIN to account for the silver inventories held by the OTHER 95% of the world (which is also PART of that 600 million ounces).
Thus it's impossible for the bullion-ETF's AND the Comex short positions to BOTH be fully-backed, with the strong likelihood being that NEITHER are fully-backed.
Kohalakid, your NONSENSE about these criminals "hedging" silver that's still in the ground doesn't stand up to analysis. There ARE no giant silver producers like Barrick or Newmont - to act as market patsies and supply the shorts with all that "ammunition".
The Comex shorts are "naked shorts" - period. And the CFTC are criminal accomplices.
Oh...by the way of the 600 million ounces in "total inventories", the silver "held" by bullion-ETF's comprises more than 2/3 of that total - despite the fact this is PRIVATELY HELD silver which is NOT on the market.
If the silver of the bullion-ETF's was NOT included in that fantasy-inventory number, then total global inventories would be under 200 million ounces (an all-time low) - and much less than just the short positions of the four Comex criminals.
Be that as it may, you do your thing and I’ll do mine.
Personally, I’d love to buy and hold physical silver, but the transaction costs dealers charge investors like me are way too steep for my blood. To me, the “next best” thing is to buy and hold SLV, which I do. My position is not margined and I can afford to hang on to it as long as it takes until the inevitable price rise occurs. I don’t trade futures or futures options, but pay close attention to them because SLV prices tend to follow what’s happening in the futures markets.
But I do like your options strategy which is not dissimilar to my own. I sell out-of-the-money covered call options on my SLV shares, at various increments above the current SLV price depending on the number of months out and, when I believe that silver is oversold (such as now), I also sell below market put options on SLV.
Happy investing!
I generally concur with your comments save one. After bowing to considerable pressure several months back, SLV has started posting on their website a listing of all the silver bars they ostensibly hold by registration number and weight. I’m not totally naïve, but I tend to think that info would be hard to fake. As such, I’m inclined to believe their reported holdings are more than likely legit (although I can’t speak for the other ETF’s)
There’s also the issue that short selling of SLV shares may have a dilutive effect, but that’s another matter…
On Jul 13 11:13 AM Jeff Nielson wrote:
> Nice commentary, Ed!
>
> Let me toss out a few numbers. The Comex "short" positions and the
> silver bullion-ETF's (i.e "paper" silver) BY THEMSELVES account for
> 120% of total global "inventories" of 600 million ounces (according
> to inventory data from the CPM Group). That doesn't even BEGIN to
> account for the silver inventories held by the OTHER 95% of the world
> (which is also PART of that 600 million ounces).
>
> Thus it's impossible for the bullion-ETF's AND the Comex short positions
> to BOTH be fully-backed, with the strong likelihood being that NEITHER
> are fully-backed.
>
> Kohalakid, your NONSENSE about these criminals "hedging" silver that's
> still in the ground doesn't stand up to analysis. There ARE no giant
> silver producers like Barrick or Newmont - to act as market patsies
> and supply the shorts with all that "ammunition".
>
> The Comex shorts are "naked shorts" - period. And the CFTC are criminal
> accomplices.
>
> Oh...by the way of the 600 million ounces in "total inventories",
> the silver "held" by bullion-ETF's comprises more than 2/3 of that
> total - despite the fact this is PRIVATELY HELD silver which is NOT
> on the market.
>
> If the silver of the bullion-ETF's was NOT included in that fantasy-inventory
> number, then total global inventories would be under 200 million
> ounces (an all-time low) - and much less than just the short positions
> of the four Comex criminals.
If you want to believe in conspiracy and "illegal shorts" (no one has been able to tell me what law is being violated) and big bank/ government suppression of the metals markets, that's just fine. I know there are enough believers to keep buying the newsletters of all the folks who put these theories forward.
I try to understand the working of the market, I've been studying it for 35 years, I've paid my dues and now I work it pretty darn well.
If I earn my nest egg trading metals and you earn yours telling people it's all smoke and mirrors, that's OK, too.
But as Sigmund Freud may have said..
"Sometimes a cigar is just a cigar."
On Jul 13 11:13 AM Jeff Nielson wrote:
> Nice commentary, Ed!
>
> Let me toss out a few numbers. The Comex "short" positions and the
> silver bullion-ETF's (i.e "paper" silver) BY THEMSELVES account for
> 120% of total global "inventories" of 600 million ounces (according
> to inventory data from the CPM Group). That doesn't even BEGIN to
> account for the silver inventories held by the OTHER 95% of the world
> (which is also PART of that 600 million ounces).
>
> Thus it's impossible for the bullion-ETF's AND the Comex short positions
> to BOTH be fully-backed, with the strong likelihood being that NEITHER
> are fully-backed.
>
> Kohalakid, your NONSENSE about these criminals "hedging" silver that's
> still in the ground doesn't stand up to analysis. There ARE no giant
> silver producers like Barrick or Newmont - to act as market patsies
> and supply the shorts with all that "ammunition".
>
> The Comex shorts are "naked shorts" - period. And the CFTC are criminal
> accomplices.
>
> Oh...by the way of the 600 million ounces in "total inventories",
> the silver "held" by bullion-ETF's comprises more than 2/3 of that
> total - despite the fact this is PRIVATELY HELD silver which is NOT
> on the market.
>
> If the silver of the bullion-ETF's was NOT included in that fantasy-inventory
> number, then total global inventories would be under 200 million
> ounces (an all-time low) - and much less than just the short positions
> of the four Comex criminals.
The whole point is that the SAME bullion-banks who are short HUNDREDS OF MILLIONS of oz's of silver on the Comex are the SAME bullion-banks who CLAIM to hold most of the ETF-silver (400 MILLION more oz's).
Sure, the bullion-ETF's may be able to post serial numbers - of silver HELD by the Comex crooks, but the Crimex...er, Comex NEVER audits the MONSTER short-positions.
Thus, just as Merril Lynch was caught doing several years ago, they are quite obviously double-counting or double-"selling" their bullion - and if the "shorts" AND the bullion-ETF's were BOTH forced to submit to audits (at the same time), it's mathematically impossible for them to come up with enough silver.
Here's a final question: when it comes down to "crunch time" and the bullion-banks have to EITHER "cover" their OWN short positions OR honour their "custodial agreements" with the bullion-ETF's, guess which they will choose to do?
Here's a hint: when Merrill was caught double-selling its bullion, it only paid a TINY fine - only a small fraction of the profits they made from their bullion-scam. So, the "choice" is really simple, they cover their own "shorts", default on their obligations to the bullion-ETF's - and only pay a TINY fine for doing so.
There is NO COURT IN EXISTENCE which would force "specific performance" of their custodial agreements (i.e. force them to deliver silver to the bullion-ETF's). I say this as someone who has his own law degree.
On Jul 13 12:13 PM tigertom wrote:
> Jeff:
>
> I generally concur with your comments save one. After bowing to
> considerable pressure several months back, SLV has started posting
> on their website a listing of all the silver bars they ostensibly
> hold by registration number and weight. I’m not totally naïve, but
> I tend to think that info would be hard to fake. As such, I’m inclined
> to believe their reported holdings are more than likely legit (although
> I can’t speak for the other ETF’s)
>
> There’s also the issue that short selling of SLV shares may have
> a dilutive effect, but that’s another matter…
>
My question to Kohala is:
In your "no manipulation" argument, you attribute the large short positions to miners "forward selling" their metals.
If this is so, how do you explain the HUGE increase in two U.S. banks short positions in Silver, and three U.S. banks in Gold in Aug. 2008?: www.cftc.gov/dea/bank/...
In that one month those few banks shorted 138 MILLION oz's of Silver, and 7.8 Million oz's of Gold (that's 327 TON's of Gold!)
Seems WAY weird to me....................
BG
Just these two U.S. banks inc
I'd like to shoot this one to kohalakid- this doesn't seem to fit well into your arguments.
kohalakid- "Your fifth paragraph assumes, wrongly I believe, that many of these bullion banks and dealers take HUGE positions one way or the other. They don't need to. They are working on hundreds of million of dollars and grinding out a few percentage points of return after financing costs translates into nice, consistent profits. I've run a small, hedged precious metals book for a long time and yes, I take spec positions both long and short. But the steady, long term profits come from grinding it out. That's how a lot of these firms have been around for hundreds of years. If you understand the concept of financing costs vs. contango you'll see the long term win for them is in scalping the basis spreads on physical vs futures/forwards."
I'm not a conspiracy theorist, but something stinks really bad in the silver market, and has for a long time. I'd wager on central bank directives, and tacit backstops from the other Fiat Worshipers in Washington. Who else could possibly care enough to either take these enormous risks or possibly guarantee their solvency?
On Jul 13 02:26 PM bilbert wrote:
> Tom - Kohala, both your viewpoints were well presented. I'm very
> impressed you two could discuss rationally, and not resort to name
> calling and general internet incivility, as one so often finds in
> various stock forums.
>
> My question to Kohala is:
>
> In your "no manipulation" argument, you attribute the large short
> positions to miners "forward selling" their metals.
>
> If this is so, how do you explain the HUGE increase in two U.S. banks
> short positions in Silver, and three U.S. banks in Gold in Aug. 2008?:
> www.cftc.gov/dea/bank/...
>
> In that one month those few banks shorted 138 MILLION oz's of Silver,
> and 7.8 Million oz's of Gold (that's 327 TON's of Gold!)
>
> Seems WAY weird to me....................
>
> BG
>
> Just these two U.S. banks inc
www.cftc.gov/dea/bank/...
And they're in the business of scalping commissions and arbitrage? Puhleeze... that's so pedestrian.
One precious metal trading center that Jeff neglects to mention is London. Unlike our regulated futures exchanges with warehouses reporting daily exchange stocks, London is MUCH less transparent and the warehouse holdings among the various dealers and depositories are not reported. Jeff says taking out bullion ETFs, worldwide inventories of silver are under 200 million oz. He's way low.....WAY low. London probably holds significantly more than COMEX's 100 million ounces. And often there are arbitrage opportunities between London and NY. It costs about a nickel an ounce to move silver London/NY and that may have been what happened in August 08. While metal may not have actually moved, the spread could have been put on and unwound later when the spread went back to "normal". I don't know for sure, but the point is, the workings of the precious metals are much more complex than most imagine. With swaps and leases and forwards and hedging of mine production and arbitrage between Asia and the Middle East and London and NY, it's not just as easy as looking at mine production and saying we're running out of silver or that COMEX is a big scam.
I'd expect just a few banks to be the players in this because it takes HUGE amounts of capital to move around $900 gold and do it in size that makes sense. But having worked in the business for as long as I have, I know how the players make their money, and they make a good living grinding it out. That others don't see it the same way is fine with me. But the more you know about how the industry works, the less the conspiracy stuff makes sense.
On Jul 13 02:26 PM bilbert wrote:
> Tom - Kohala, both your viewpoints were well presented. I'm very
> impressed you two could discuss rationally, and not resort to name
> calling and general internet incivility, as one so often finds in
> various stock forums.
>
> My question to Kohala is:
>
> In your "no manipulation" argument, you attribute the large short
> positions to miners "forward selling" their metals.
>
> If this is so, how do you explain the HUGE increase in two U.S. banks
> short positions in Silver, and three U.S. banks in Gold in Aug. 2008?:
> www.cftc.gov/dea/bank/...
>
> In that one month those few banks shorted 138 MILLION oz's of Silver,
> and 7.8 Million oz's of Gold (that's 327 TON's of Gold!)
>
> Seems WAY weird to me....................
>
> BG
>
> Just these two U.S. banks inc
If I can turn my silver position even twice a month and make 5 cents an ounce each time, that's 10% per year. What bank doesn't like that?? A trading desk with a few traders and a couple back office staff...add a few hundred million dollars= profit.
On Jul 13 02:54 PM Whippet wrote:
> Oh, and this month- 32,407 short contracts (32.3% of open positions!!!)
> vs. 527 long contracts. BANKS ONLY.
> www.cftc.gov/dea/bank/...
> And they're in the business of scalping commissions and arbitrage?
> Puhleeze... that's so pedestrian.
On Jul 13 02:48 PM Whippet wrote:
> Fantastic link. 6200 contracts short (31 million ounces) versus
> 22 long contracts. Thats a 282:1 ratio of short to long positions...
>
> I'd like to shoot this one to kohalakid- this doesn't seem to fit
> well into your arguments.
> kohalakid- "Your fifth paragraph assumes, wrongly I believe, that
> many of these bullion banks and dealers take HUGE positions one way
> or the other. They don't need to. They are working on hundreds of
> million of dollars and grinding out a few percentage points of return
> after financing costs translates into nice, consistent profits. I've
> run a small, hedged precious metals book for a long time and yes,
> I take spec positions both long and short. But the steady, long term
> profits come from grinding it out. That's how a lot of these firms
> have been around for hundreds of years. If you understand the concept
> of financing costs vs. contango you'll see the long term win for
> them is in scalping the basis spreads on physical vs futures/forwards."
>
> I'm not a conspiracy theorist, but something stinks really bad in
> the silver market, and has for a long time. I'd wager on central
> bank directives, and tacit backstops from the other Fiat Worshipers
> in Washington. Who else could possibly care enough to either take
> these enormous risks or possibly guarantee their solvency?
On Jul 13 03:10 PM kohalakid wrote:
> I guess all the Las Vegas sports books put the fix in on all the
> big sports events because they sure couldn't possibly be happy working
> on a 6% win rate, could they.
>
> If I can turn my silver position even twice a month and make 5 cents
> an ounce each time, that's 10% per year. What bank doesn't like that??
> A trading desk with a few traders and a couple back office staff...add
> a few hundred million dollars= profit.
On Jul 13 03:21 PM kohalakid wrote:
> I should have clarified that by saying I don't see how the banks
> need to take huge SPEC positions. They do take large hedge positions
> on commitments and physical they have. I'd expect them to. They do
> financing for mines and run a bullion book and make good money doing
> it. I'd expect them to be short, not long on COMEX and be long physical/forwards
> to offset.
A Mexican producer sells 1 million ounces to HSBC for delivery in a year. The Mexicans lock in their sales rates and now know they can operate at a profit. HSBC now has to sell 200 lots of silver on COMEX and that position will stay open for a year.
Some forwards with producers can be for YEARS out, so the bank short numbers can be big and constant. When prices rise, the producers forward sell more. When prices drop, users buy from the banks and the banks buy on COMEX to offset.
It's interesting that almost 2/3 of the deliverable brands of silver on COMEX are produced outside the United States. Who do you think they hedge and deliver through?? Not First National Bank of Latvia.
They use a New York based bullion bank.
On Jul 13 03:28 PM Whippet wrote:
> Don't get me wrong- I completely agree with you in that there is
> money to be made there. And I appreciate your arguments and am not
> disparaging your expertise on the matters. I am simply looking,
> as are the author and many of the other commentors, for an explanation
> as to the SPECIFIC, ENORMOUS, CONSISTENT, UNILATERALLY SHORT positions
> reported by the CFTC on a monthly basis. Huge imbalances on soybean,
> oil, wheat, and corn contracts are completely understandable, as
> these are delivered and consumed. International contract balances
> are very close to a 1:1 ratio, and are on a month to month basis.
> And miner hedging, which is essentially nonexistent at this point
> in time by the majors, would show up as LONG positions in the investment
> banks, would it not??? But nothing short of "conspiracy" explains
> the domestic bank trading activity of silver, gold, and even palladium
> (interesting that they don't play platinum.) You have not adequately
> addressed this point.
On Jul 13 03:31 PM Whippet wrote:
> They need to hedge a NET 162 MILLION OUNCES this month? You seriously
> believe that?
"As far as whether the hedger is hedging physical or another forward position dealt to him by someone else, that's not a distinction the COMEX or the CFTC seems to make. They are hedging commitments as well as physical."
The banks are acting as counterparty to the central bank, with the intention that both sides will be cash settled, so they are hedgers by the CFTC definition. Let's be clear that the banks aren't going to take pricing risk in keeping silver prices low. The only risk to the the banks is one of deliverability.
What I am unsure about is legal position. Surely failure to perform under a custodial agreement is an event of default, as it is a credit risk against? I have holdings in ETFS Securities, physical gold and silver (PHAU.L and PHAG.L) which has allocated metal held in custodial banks in a fiduciary form under UK law, so creditors against the custodian would have no claim on the holding, i.e. it has no credit risk. Obviously, there is a risk of theft, but then this cannot be avoided even if you bury the stuff in a chest on a desert island.
As for the info on the July 2009 short silver contracts, if this isn't a smoking gun, I don't know what is.
On Jul 13 12:12 AM kohalakid wrote:
> Sir, I respectfully disagree.
> Please go to the CFTC website cftc.gov
> Click on the right under Explanatory Notes and read the CFTC definition
> of a Commercial Trader. Being a Commercial Trader has advantages
> for the trading entity. Lower margins for bona fide hedge trader
> being a MAJOR benefit. Additionally, when you sign an account application
> as a HEDGE Account, you represent that your trades are hedges and
> that you will alert your broker if you are trading something that
> is not hedged.
> I have been a hedge trader for 30 years, holding physical metal and
> hedging it via futures. Does that mean I never speculate??
> Of course not. I speculate plenty, both long and short. But the COMEX
> has a big reason to make sure hedge traders are actually hedging.
> It's the initial margin. The exchange makes a good percentage of
> its income on interest on the margin deposits. Hedge traders pay
> a MUCH lower margin rate because the exchange perceives them as lower
> risk than a spec trader. So it's actually in the exchanges' interest
> to have more classified as Non-commercial and get the higher margin
> rates. The exchange earns more and believe me they are not a non-profit
> organization.
> As far as whether the hedger is hedging physical or another forward
> position dealt to him by someone else, that's not a distinction the
> COMEX or the CFTC seems to make. They are hedging commitments as
> well as physical. That's the way the market works.
> I have filled out reporting forms for my positions in Gold and Platinum...never
> for silver..and have been recorded as a Commercial Trader. I've had
> calls from the CFTC regarding my positions in platinum. I lived this
> stuff, not just read some conspiracy theory from folks trying to
> sell newsletters.
>
>
>
> On Jul 12 05:28 PM nobby73 wrote:
On Jul 13 03:38 PM kohalakid wrote:
> No, mine hedging wont show up as a bank long. It shows up as a bank
> SHORT and can be rolled for years by the bank, as follows:
>
> A Mexican producer sells 1 million ounces to HSBC for delivery in
> a year. The Mexicans lock in their sales rates and now know they
> can operate at a profit. HSBC now has to sell 200 lots of silver
> on COMEX and that position will stay open for a year.
>
> Some forwards with producers can be for YEARS out, so the bank short
> numbers can be big and constant. When prices rise, the producers
> forward sell more. When prices drop, users buy from the banks and
> the banks buy on COMEX to offset.
>
> It's interesting that almost 2/3 of the deliverable brands of silver
> on COMEX are produced outside the United States. Who do you think
> they hedge and deliver through?? Not First National Bank of Latvia.
>
> They use a New York based bullion bank.
Some bullion banks agree to buy the forward silver on a "no-margin call" basis, paying a discount to the July in exchange for forgoing margin calls on the forward position. It's all probability calculation by the bank regarding the market and the stability of the mining counterparty.
The 162 million ounces is not all hedged initially for July 2009. The basis of these trades could be years old, rolled to the July active month and now in Sept and then later rolled to Dec. And it's not all forward selling. Some is hedged physical metal held by the banks.
I own COMEX silver receipts, so I own part of the registered warehouse stocks. I'm also short Sept silver futures against those.
That's a common position held by many banks.
On Jul 13 04:36 PM Whippet wrote:
> Don't most miners hedge by directly selling futures contracts? This
> would not register as short contracts on BANK balance sheets. You
> make a good point about bank financing of mining operations; but
> does this combined with physical hedging really represent 162 million
> ounces in July contracts? That number doesn't seem the least suspicious
> to you?
In turn, that was followed by the July 7, 2009 hubbub regarding “excessive speculation” in the oil markets and the CTFC announcement [www.cftc.gov/stellent/.../@newsroom/documents/p... that it would hold hearings related to establishing new position limits in energy commodities.
I think Ted Butler does an excellent job in his June 29, 2009 Commentary [www.investmentrarities...] of taking the Senate Report, point by point, and explaining how the exact same arguments and conclusions should equally apply to the precious metals markets.
On Jul 12 04:04 PM kohalakid wrote:
> What law is violated by a Commercial trader being short enough contracts
> to hedge their position????
Bottom line: Maybe there is no manipulation, but how can the average (or even above average) investor know that? There is simply not enough transparency and whenever any one player, or small group of players, control that large a chunk of any market, it scares the crap out of me.
They reclassified oil merchants who had sold forward positions to hedge fund speculators. Since the oil dealers were actually hedging, the trades were previously put in the Commercial category. But the CFTC decided that since such a huge percentage of the trades were the basis of hedge fund speculation, that they needed to be re-categorized. That's logical, it makes sense and it makes the market more transparent. If it was that easy to do in Oil, and the same thing was occurring to the same extent in the metals, you'd think they would break down the trades the same way for gold and silver.
I guess two CFTC investigations didn't bring up the same urgency they found in crude futures. But it shows the CFTC examines the situations and is not afraid to act.
And there are no position limits for hedgers.
Who sets position limits on Spec positions?? The Exchange or the Feds???
On Jul 13 05:55 PM tigertom wrote:
> The alleged “criminality” previous referred to isn’t on the part
> of the traders themselves, per se. It’s the failure of the CFTC
> and COMEX management to set and enforce reasonable position limits,
> as required by Federal law, to assure against potentially manipulative
> concentration. This was precisely the subject of the recent (June
> 24, 2009) US Senate Permanent Subcommittee on Investigations report
> entitled “Excessive Speculation in the Wheat Market.” [levin.senate.gov/newsr...].
>
>
> In turn, that was followed by the July 7, 2009 hubbub regarding “excessive
> speculation” in the oil markets and the CTFC announcement [www.cftc.gov/stellent/.../@newsroom/documents/p...
> that it would hold hearings related to establishing new position
> limits in energy commodities.
>
> I think Ted Butler does an excellent job in his June 29, 2009 Commentary
> [www.investmentrarities...]
> of taking the Senate Report, point by point, and explaining how the
> exact same arguments and conclusions should equally apply to the
> precious metals markets.
>
On Jul 13 06:14 PM kohalakid wrote:
Who sets position limits on Spec positions?? The Exchange or the Feds???
But in metals there are no position limits for bona fide hedges. I keep hearing about "illegal shorts" but they sure don't look illegal to me and the CFTC sure has looked at the metals and not found any reason to make the same move they did in oil.
The problem will come in oil when hedgers want to hedge and spec position limits don't allow specs to buy all the hedgers want to sell. That leads to inefficient markets.
On Jul 13 06:30 PM tigertom wrote:
> My understanding is that the ultimate responsibility lies with the
> CFTC. They set the limits themselves in ag markets. In all other
> markets, they defer to the exchanges who set "allowance limits" which
> are subject to CFTC review and approval. My uptake regarding the
> recent flap over oil is that the CFTC is likely to reassert control
> and set position limits for all energy markets themselves.
>
> Who sets position limits on Spec positions?? The Exchange or the
> Feds???
I also thank you fou your kind comments about civility. I'm merely seeking to exchange with other commentors to share what I know (or what I think I know) and to increase my own understanding.
The HUGE short position reported by one or more large US banks first appeared in the August ’08 CFTC Bank Participation report (these reports are issued quarterly, in early Feb, May, Aug and Nov). If it was, in fact, a “new” position (spreading or otherwise), where was the other side? There was no concurrent increase in the overall number of open contracts during the six months prior to issuance of the August ’08 report. In fact, during the 6 months prior to that report, the overall number of open interest silver contracts on the COMEX actually declined by roughly 60,000. Almost all of that decline occurred between early Feb and early April, then stayed more or less constant through early August. During this same period, the number of net short interest futures contracts controlled by the 4 largest commercial shorts actually declined by a little more than 3,200.
As I suggested earlier, the only logical explanation is that it most of it wasn’t a new position at all, merely a shift between a non-bank player and a bank player, i.e., the mid-March (announced) takeover of Bear Sterns (a non-bank) by JPMorgan/Chase (a bank) resulting in Bear’s former position having to be included as “bank participation”. That it didn’t show up until the August report can be explained by the time lag in consolidating Bear’s and JPM’s books and accounts.
On Jul 13 02:26 PM bilbert wrote:
> Tom - Kohala, both your viewpoints were well presented. I'm very
> impressed you two could discuss rationally, and not resort to name
> calling and general internet incivility, as one so often finds in
> various stock forums.
>
> My question to Kohala is:
>
> In your "no manipulation" argument, you attribute the large short
> positions to miners "forward selling" their metals.
>
> If this is so, how do you explain the HUGE increase in two U.S. banks
> short positions in Silver, and three U.S. banks in Gold in Aug. 2008?:
> www.cftc.gov/dea/bank/...
>
> In that one month those few banks shorted 138 MILLION oz's of Silver,
> and 7.8 Million oz's of Gold (that's 327 TON's of Gold!)
>
> Seems WAY weird to me....................
>
> BG
>
> Just these two U.S. banks inc
On Jul 13 06:42 PM kohalakid wrote:
> OK, I agree!!
> But in metals there are no position limits for bona fide hedges.
> I keep hearing about "illegal shorts" but they sure don't look illegal
> to me and the CFTC sure has looked at the metals and not found any
> reason to make the same move they did in oil.
> The problem will come in oil when hedgers want to hedge and spec
> position limits don't allow specs to buy all the hedgers want to
> sell. That leads to inefficient markets.
I'm long all the metals. I don't think the bullion banks are out to get me!! I actually try to follow their business model on a smaller scale and it's been paying the bills for 30 years!!
On Jul 13 06:51 PM tigertom wrote:
> Like I above, said above: Maybe there is no manipulation, but how
> can the average (or even above average) investor know that? There
> is simply not enough transparency and whenever any one player, or
> small group of players, control that large a chunk of any one side
> of any market, it scares the crap out of me.
Conversely, in the Comex silver futures market, there are FOUR banks EACH with short positions larger than the LONG position of the Hunt Brothers - when THEY were accused of "cornering" the market.
Essentially, the CFTC is a totally lawless accomplice of Wall Street who invents new rules when it needs to, and IGNORES existing rules whenever they feel like it. Continuing to defend their actions despite overwhelming evidence CLEARLY brings your OWN motives into question - despite your claim you have none (lol).
How many people spend the time to write 20 comments, when they claim (at the same time) to have no "vested interest"?
On Jul 13 06:14 PM kohalakid wrote:
> Yes, and what did the CFTC do in reviewing the oil situation??<br/>...
> reclassified oil merchants who had sold forward positions to hedge
> fund speculators. Since the oil dealers were actually hedging, the
> trades were previously put in the Commercial category. But the CFTC
> decided that since such a huge percentage of the trades were the
> basis of hedge fund speculation, that they needed to be re-categorized.
> That's logical, it makes sense and it makes the market more transparent.
> If it was that easy to do in Oil, and the same thing was occurring
> to the same extent in the metals, you'd think they would break down
> the trades the same way for gold and silver.
> I guess two CFTC investigations didn't bring up the same urgency
> they found in crude futures. But it shows the CFTC examines the situations
> and is not afraid to act.
>
> And there are no position limits for hedgers.
>
> Who sets position limits on Spec positions?? The Exchange or the
> Feds???
I mentioned that the CFTC, rightly in my mind, clarified the category that it placed certain traders in when they determined that the previous category didn't reflect the status of the trades as best as could be reported. The CFTC didn't "attack" anyone!!! And the new CFTC category didn't prevent anyone from executing the same trades.
As to your second point, the Hunt Brothers were admitted speculators and subject to different rules. I think the COMEX changing the game on the Hunts was more than a bit slimy. The 4 banks you keep referring to are in the Commercial category.
They use the markets for hedging. If you don't want to believe it, that's just fine with me.
As for your last point that I must have some vested interest, if you want I'll give you my phone number and you can call and we'll have a nice chat. I'll tell you who I am and what my business has been for 30 years and that now, while still not 50 years old, I'm more or less retired and trade as I have been but on a much smaller scale, entirely for my amusement. So I still put in the hours in front of the screen.
At that point if you still question my motives beyond my desire to share my knowledge with fellow traders and investors, then so be it.
On Jul 13 09:09 PM Jeff Nielson wrote:
> Koholakid, essentially what you've acknowledged is that the CFTC
> invented a pretext for attacking oil speculators - when there was
> NO overt evidence of manipulation in that market.
>
> Conversely, in the Comex silver futures market, there are FOUR banks
> EACH with short positions larger than the LONG position of the Hunt
> Brothers - when THEY were accused of "cornering" the market.
>
> Essentially, the CFTC is a totally lawless accomplice of Wall Street
> who invents new rules when it needs to, and IGNORES existing rules
> whenever they feel like it. Continuing to defend their actions despite
> overwhelming evidence CLEARLY brings your OWN motives into question
> - despite your claim you have none (lol).
>
> How many people spend the time to write 20 comments, when they claim
> (at the same time) to have no "vested interest"?
cheers to you all for your contributions.
--ikk
I also want to point out that as of Friday, the COMEX positions had returned back to 118.5 Moz (approx) with much of the movement in the eligible category.
The difference between Eligible and Registered is that registered silver is silver being held for others, and not available for disbursement, but is counted overall for COMEX silver totals.
While totals have gone back up (still down from the 119 Moz level), the amount of silver in COMEX warehouses has fallen significantly from the 134 Moz reported in 2008. (ScottiaMocatta, Metal Matters). Total contract volume also appears to be down from the record levels of 2008.
I appreciate everyones participation as I continue to learn from each of you (sometimes it gives me new ideas) and gain insights into each sides positions. I will try to continue to provide accurate information and I am trying to compile a tally of known silver stocks, including London (which as was pointed out, is like a brick wall compared to COMEX numbers). Published reports do indicated that Silver ETF's hold about 2/3'rds of the worlds above ground silver stocks (approx. 348 Moz - ScottiaMocatta July 2009 Metal Matters) which adding in the COMEX's 118 Moz would only leave 56 Moz for the rest of the world. I believe that number to be too low for reasons I will get into in another post.
Thanks again to everyone
I'm not sure you have the Registered/Eligible silver thing correct.
Registered silver is the amount of silver broken down into approx 5000 oz individual Warehouse Receipts that can then be used to fulfill obligations for contract delivery. If you hold a COMEX silver contract receipt, it's included in Registered silver. It's available for "disbursement" in that it is tradeable and deliverable and withdrawable.
Eligible silver is silver that meets all the requirements for COMEX good delivery, is sitting in an approved warehouse, but has just not been broken down into 5000 oz lots. Since the depositories charge a fee to the silver owners to put the lots onto warrant, some holders may store their physical silver without breaking it down into individual contract-sized lots until they need to.
(And this will be my final comment on this topic.)
I will accept that you honestly believe everything you’ve said in this exchange to be true relative to how the PM (and specifically silver) markets are “supposed” to work. But I’m still not convinced there isn’t something “fishy” going on.
I’ve spent enough time (and money) in casinos to know that the odds on all the games played there favor the house. If they didn’t, the house wouldn’t play. As a player, through either luck or skill, one can beat the odds in the short term. But the longer one continues to play, and the more bets they place, the more likely their overall results will approximate the true odds, i.e., the house is going to win in the end.
I too am “semi-retired”, have over 30 years of successful investing experience, and one thing I’ve come to realize, especially these last 2-3 years, is that Wall Street is nothing but one big casino and all the “gaming rules” favor the “house”. To paraphrase Jim Cramer, you don’t make money in the long run by swimming upstream, i.e., betting against “the street”.
The second thing I’ve learned is there are “traders” and “investors”. Most traders, in the long run, lose. Nobody has a crystal ball that can accurately and consistently predict which direction a given market is going to go at any given time. They may win in the short term (any many do), but most lose just as often and, in the end, their stake is slowly but steadily eaten away by transaction costs. Technical analysis can help, but it can’t account for unforeseen geo-political events, natural and man-made disasters, knowledge that hasn’t yet been made public, or when someone’s “stacking the deck”. The only traders that consistently win are the “house”.
Investors, on the other hand, are in it for the long term and rely primarily on fundamentals. Over the long term, fundamentals invariably win out. Even the “house” almost always sides with the fundamentals when it comes committing long term capital. (That is, unless they know something no one else does.)
Which brings me back to silver. All of the fundamentals regarding silver clearly indicate silver is severely underpriced relative to gold. For the better part of 2000 years (up until roughly 40 years ago, when we went off the “gold standard”), the price ratio between gold and silver stayed relatively constant, approximately 16:1, which is the precise inverse of their respective occurrences in nature and the amounts that have been pulled out of the ground over time. Everything else being equal, if gold is trading for $900/oz, then silver “ought” to be trading in the $50+ range.
But everything else is NOT equal. Over the past 100 or so years, silver has become a very widely used industrial metal – in photography, in electronics, in medicine and as a reactive agent in literally thousands of chemical processes. Coinage and jewelry only account for a miniscule fraction of its use. The facts are clear that while 90+% of the gold that’s ever been extracted from the ground is still around, 90-95% of all the silver that’s ever been mined is GONE. Best estimates by renowned experts strongly suggest there are upwards of 4 to 5 times as much refined gold currently in existence than refined silver. AND the world continues to consume more silver every year than is produced. The huge stockpiles that existed 50-60 years ago in the hands of governments and central banks are all but gone. Exchange warehouse stocks ARE shrinking. And silver is one of the very few metals that is both a widely used industrial metal and an investment vehicle. Lastly, much of the silver that is known to exist (including what’s in the ETFs) is held by investors (like me) who have no intention of parting with it at current price levels, hence it’s not currently “available”.
So current worldwide supply, consumption, investor demand and inventory levels ALL strongly suggest the “historical” 16:1 price ratio should no longer apply. If anything, that ratio should be less, perhaps even considerably less. Yet, while gold hovers around $900/oz, silver languishes around $13/oz. That’s almost a 70:1 ratio, and it’s hovered, more or less, around that same ratio for years. I don’t profess to know everything about the “who, how or why”, but I am convinced that the only logical explanation is the “game” HAS to be rigged, and that it’s been going on for quite some time. Someone or somebody is “stacking the deck”. And whatever you may say to the contrary notwithstanding, when 4 or fewer traders control upwards of 70% of the short side of the largest silver futures market in the world, I can fully understand why so many (myself included) consider them the “most likely” suspects. You say they're not, and I believe you believe that. But I'm still not convinced.
Let's just leave things at that.
Happy investing to all!
You use the casino analogy and it's a useful one.
In a casino, you need to understand the odds, the customs and practices etc etc. You CAN walk up to a dice table and make a stupid bet, percentage-wise, and still win.
But as we know, there are wagers that can be made in a casino that have advantages for the player. Blackjack card counters increase their bets when they have the edge. Sports wagering offers some good opportunities.
Same with all markets. Option buyers lose 90% of the time. Hence, I'm an option seller. Using Bullish Consensus numbers, if 80% of market participants think a market will go up, in theory they've already bought. Who's left to keep buying??
There are tons of opportunities in the metals markets, both long and short. What I see with they guys who take only a long position based on some conspiracy theory, is that they miss a huge amount of opportunity to increase their capital. Metals offer wealth preservation, but if you are 100% in metals, you forgo income.
That's why I trade, and adjust and write puts and calls.
And it's been paying the bills just fine.
happy trading!!
On Jul 14 01:18 PM tigertom wrote:
> Reply to kohalakid:
>
> (And this will be my final comment on this topic.)
>
> I will accept that you honestly believe everything you’ve said in
> this exchange to be true relative to how the PM (and specifically
> silver) markets are “supposed” to work. But I’m still not convinced
> there isn’t something “fishy” going on.
>
> I’ve spent enough time (and money) in casinos to know that the odds
> on all the games played there favor the house. If they didn’t, the
> house wouldn’t play. As a player, through either luck or skill,
> one can beat the odds in the short term. But the longer one continues
> to play, and the more bets they place, the more likely their overall
> results will approximate the true odds, i.e., the house is going
> to win in the end.
>
> I too am “semi-retired”, have over 30 years of successful investing
> experience, and one thing I’ve come to realize, especially these
> last 2-3 years, is that Wall Street is nothing but one big casino
> and all the “gaming rules” favor the “house”. To paraphrase Jim
> Cramer, you don’t make money in the long run by swimming upstream,
> i.e., betting against “the street”.
>
> The second thing I’ve learned is there are “traders” and “investors”.
> Most traders, in the long run, lose. Nobody has a crystal ball that
> can accurately and consistently predict which direction a given market
> is going to go at any given time. They may win in the short term
> (any many do), but most lose just as often and, in the end, their
> stake is slowly but steadily eaten away by transaction costs. Technical
> analysis can help, but it can’t account for unforeseen geo-political
> events, natural and man-made disasters, knowledge that hasn’t yet
> been made public, or when someone’s “stacking the deck”. The only
> traders that consistently win are the “house”.
>
> Investors, on the other hand, are in it for the long term and rely
> primarily on fundamentals. Over the long term, fundamentals invariably
> win out. Even the “house” almost always sides with the fundamentals
> when it comes committing long term capital. (That is, unless they
> know something no one else does.)
>
> Which brings me back to silver. All of the fundamentals regarding
> silver clearly indicate silver is severely underpriced relative to
> gold. For the better part of 2000 years (up until roughly 40 years
> ago, when we went off the “gold standard”), the price ratio between
> gold and silver stayed relatively constant, approximately 16:1, which
> is the precise inverse of their respective occurrences in nature
> and the amounts that have been pulled out of the ground over time.
> Everything else being equal, if gold is trading for $900/oz, then
> silver “ought” to be trading in the $50+ range.
>
> But everything else is NOT equal. Over the past 100 or so years,
> silver has become a very widely used industrial metal – in photography,
> in electronics, in medicine and as a reactive agent in literally
> thousands of chemical processes. Coinage and jewelry only account
> for a miniscule fraction of its use. The facts are clear that while
> 90+% of the gold that’s ever been extracted from the ground is still
> around, 90-95% of all the silver that’s ever been mined is GONE.
> Best estimates by renowned experts strongly suggest there are upwards
> of 4 to 5 times as much refined gold currently in existence than
> refined silver. AND the world continues to consume more silver every
> year than is produced. The huge stockpiles that existed 50-60 years
> ago in the hands of governments and central banks are all but gone.
> Exchange warehouse stocks ARE shrinking. And silver is one of the
> very few metals that is both a widely used industrial metal and an
> investment vehicle. Lastly, much of the silver that is known to
> exist (including what’s in the ETFs) is held by investors (like me)
> who have no intention of parting with it at current price levels,
> hence it’s not currently “available”.
>
> So current worldwide supply, consumption, investor demand and inventory
> levels ALL strongly suggest the “historical” 16:1 price ratio should
> no longer apply. If anything, that ratio should be less, perhaps
> even considerably less. Yet, while gold hovers around $900/oz, silver
> languishes around $13/oz. That’s almost a 70:1 ratio, and it’s hovered,
> more or less, around that same ratio for years. I don’t profess
> to know everything about the “who, how or why”, but I am convinced
> that the only logical explanation is the “game” HAS to be rigged,
> and that it’s been going on for quite some time. Someone or somebody
> is “stacking the deck”. And whatever you may say to the contrary
> notwithstanding, when 4 or fewer traders control upwards of 70% of
> the short side of the largest silver futures market in the world,
> I can fully understand why so many (myself included) consider them
> the “most likely” suspects. You say they're not, and I believe you
> believe that. But I'm still not convinced.
>
> Let's just leave things at that.
>
> Happy investing to all!
On Jul 14 01:18 PM tigertom wrote:
> Reply to kohalakid:
>
> (And this will be my final comment on this topic.)
>
> I will accept that you honestly believe everything you’ve said in
> this exchange to be true relative to how the PM (and specifically
> silver) markets are “supposed” to work. But I’m still not convinced
> there isn’t something “fishy” going on.
>
> I’ve spent enough time (and money) in casinos to know that the odds
> on all the games played there favor the house. If they didn’t, the
> house wouldn’t play. As a player, through either luck or skill,
> one can beat the odds in the short term. But the longer one continues
> to play, and the more bets they place, the more likely their overall
> results will approximate the true odds, i.e., the house is going
> to win in the end.
>
> I too am “semi-retired”, have over 30 years of successful investing
> experience, and one thing I’ve come to realize, especially these
> last 2-3 years, is that Wall Street is nothing but one big casino
> and all the “gaming rules” favor the “house”. To paraphrase Jim
> Cramer, you don’t make money in the long run by swimming upstream,
> i.e., betting against “the street”.
>
> The second thing I’ve learned is there are “traders” and “investors”.
> Most traders, in the long run, lose. Nobody has a crystal ball that
> can accurately and consistently predict which direction a given market
> is going to go at any given time. They may win in the short term
> (any many do), but most lose just as often and, in the end, their
> stake is slowly but steadily eaten away by transaction costs. Technical
> analysis can help, but it can’t account for unforeseen geo-political
> events, natural and man-made disasters, knowledge that hasn’t yet
> been made public, or when someone’s “stacking the deck”. The only
> traders that consistently win are the “house”.
>
> Investors, on the other hand, are in it for the long term and rely
> primarily on fundamentals. Over the long term, fundamentals invariably
> win out. Even the “house” almost always sides with the fundamentals
> when it comes committing long term capital. (That is, unless they
> know something no one else does.)
>
> Which brings me back to silver. All of the fundamentals regarding
> silver clearly indicate silver is severely underpriced relative to
> gold. For the better part of 2000 years (up until roughly 40 years
> ago, when we went off the “gold standard”), the price ratio between
> gold and silver stayed relatively constant, approximately 16:1, which
> is the precise inverse of their respective occurrences in nature
> and the amounts that have been pulled out of the ground over time.
> Everything else being equal, if gold is trading for $900/oz, then
> silver “ought” to be trading in the $50+ range.
>
> But everything else is NOT equal. Over the past 100 or so years,
> silver has become a very widely used industrial metal – in photography,
> in electronics, in medicine and as a reactive agent in literally
> thousands of chemical processes. Coinage and jewelry only account
> for a miniscule fraction of its use. The facts are clear that while
> 90+% of the gold that’s ever been extracted from the ground is still
> around, 90-95% of all the silver that’s ever been mined is GONE.
> Best estimates by renowned experts strongly suggest there are upwards
> of 4 to 5 times as much refined gold currently in existence than
> refined silver. AND the world continues to consume more silver every
> year than is produced. The huge stockpiles that existed 50-60 years
> ago in the hands of governments and central banks are all but gone.
> Exchange warehouse stocks ARE shrinking. And silver is one of the
> very few metals that is both a widely used industrial metal and an
> investment vehicle. Lastly, much of the silver that is known to
> exist (including what’s in the ETFs) is held by investors (like me)
> who have no intention of parting with it at current price levels,
> hence it’s not currently “available”.
>
> So current worldwide supply, consumption, investor demand and inventory
> levels ALL strongly suggest the “historical” 16:1 price ratio should
> no longer apply. If anything, that ratio should be less, perhaps
> even considerably less. Yet, while gold hovers around $900/oz, silver
> languishes around $13/oz. That’s almost a 70:1 ratio, and it’s hovered,
> more or less, around that same ratio for years. I don’t profess
> to know everything about the “who, how or why”, but I am convinced
> that the only logical explanation is the “game” HAS to be rigged,
> and that it’s been going on for quite some time. Someone or somebody
> is “stacking the deck”. And whatever you may say to the contrary
> notwithstanding, when 4 or fewer traders control upwards of 70% of
> the short side of the largest silver futures market in the world,
> I can fully understand why so many (myself included) consider them
> the “most likely” suspects. You say they're not, and I believe you
> believe that. But I'm still not convinced.
>
> Let's just leave things at that.
>
> Happy investing to all!
Kudos to you. I'm glad your making money trading. I hope you contined to have success. Like I said earlier, your options stategy is not dissimilar from that which I employ myself writing "stock" options on my SLV shares and, so far, it's working well for me too. But that has nothing to do with my basis question/premise.
Why have the trading ratios between gold and silver defied the "historic norms" for the better part of 20 or so years in the exact OPPOSITE direction of what the fundamemntals suggest? Any casino operator would immediately see that as a red flag that something's amok.
But as mining efficiencies improve, they are getting more metal out of a ton of ore than they did before.
Also, look at the relationship between platinum and gold as similar to silver/gold. Platinum was almost 2 1/2 times the price of gold not too long ago, and then just recently traded at a couple dollars UNDER gold. I don't see any evil manipulation in platinum. It's the result of changing industrial demand. Same with silver. As you guys have all pointed out, there are not huge above ground stocks of silver and governments don't hoard it like gold. But they do pull about 2 million ounces out of the ground every day, 365 days a year. Even a little burp in the world economy will affect industrial usage and we've had more than a little burp recently.
I expect the ratios to move around based on changing situations.
Aluminum used to be a "precious metal" because it's extraction and processing was so difficult with the then current technology.
I guess that "historic norm" changed too.
Like I said, I'm long silver, but with reasonable expectations of what I think it can do.
On Jul 14 02:34 PM tigertom wrote:
> Reply to kohalakid:
>
> Kudos to you. I'm glad your making money trading. I hope you contined
> to have success. Like I said earlier, your options stategy is not
> dissimilar from that which I employ myself writing "stock" options
> on my SLV shares and, so far, it's working well for me too. But
> that has nothing to do with my basis question/premise.
>
> Why have the trading ratios between gold and silver defied the "historic
> norms" for the better part of 20 or so years in the exact OPPOSITE
> direction of what the fundamemntals suggest? Any casino operator
> would immediately see that as a red flag that something's amok.
No disrespect intended, but I humbly disagree.
I willingly concede consumption may be down due to the worldwide recession, but so is production (see my earlier concerning much of the world's current silver production being the by-product of producing other base metals, production of which has also been curtailed). The facts are that we continue to consume more every year than current production despite advances in mining/refining technology. So that still doesn't explain why gold/silver price ratios have been so out of whack for so long in the wrong direction, and especially in the face of declining inventories. If you can't do better than that, there's no point in continuing this discussion. I rest my case.
On Jul 14 03:03 PM kohalakid wrote:
> As you have pointed out, gold is basically a monetary metal and silver
> an industrial metal. Industrial usages have changed at lot over the
> last 20 years. Now we have less photo usage in silver and almost
> no flatware usage, but are finding other uses for silver in solar
> and computers etc etc.
> But as mining efficiencies improve, they are getting more metal out
> of a ton of ore than they did before.
>
> Also, look at the relationship between platinum and gold as similar
> to silver/gold. Platinum was almost 2 1/2 times the price of gold
> not too long ago, and then just recently traded at a couple dollars
> UNDER gold. I don't see any evil manipulation in platinum. It's the
> result of changing industrial demand. Same with silver. As you guys
> have all pointed out, there are not huge above ground stocks of silver
> and governments don't hoard it like gold. But they do pull about
> 2 million ounces out of the ground every day, 365 days a year. Even
> a little burp in the world economy will affect industrial usage and
> we've had more than a little burp recently.
> I expect the ratios to move around based on changing situations.
>
> Aluminum used to be a "precious metal" because it's extraction and
> processing was so difficult with the then current technology.
> I guess that "historic norm" changed too.
> Like I said, I'm long silver, but with reasonable expectations of
> what I think it can do.
The Silver Institute puts 2008 mine production at just under 681 million oz, a TEN YEAR HIGH.
And I think you have to be careful looking at what you term "consumption" because unlike oil that gets burned, a lot of the silver fabrication is recyclable as evidenced by the fact about 20%
of total silver supply is the result of recycling old applications.
Look at the Silver Institute numbers. Total Supply is LARGER than Total Fabrication Demand. Investment in silver makes up the balance of demand and that is very price sensitive to clear the market. So if you wonder why the price doesn't rise as much as we'd all like it to, it's because only a lower price will encourage investment to take the excess that has occurred each year for the last 6 years.
On Jul 14 04:22 PM tigertom wrote:
> Reply to kohalakid:
>
> No disrespect intended, but I humbly disagree.
>
> I willingly concede consumption may be down due to the worldwide
> recession, but so is production (see my earlier concerning much of
> the world's current silver production being the by-product of producing
> other base metals, production of which has also been curtailed).
> The facts are that we continue to consume more every year than current
> production despite advances in mining/refining technology. So that
> still doesn't explain why gold/silver price ratios have been so out
> of whack for so long in the wrong direction, and especially in the
> face of declining inventories. If you can't do better than that,
> there's no point in continuing this discussion. I rest my case.
>
>
> On Jul 14 03:03 PM kohalakid wrote:
Here is a link to the SIVR ETF website:
www.etfsecurities.com/...
Their Vault Report:
www.etfsecurities.com/...
How to Invest
www.etfsecurities.com/...
Their prospectus:
www.etfsecurities.com/...
As for production, mining was at a 10 year high in 2008, and total demand was 150 million ounces more than mining production. The difference came from Old Silver Scrap which includes existing above ground stocks as well as recycling from photographic uses which only totalled 104 Moz, so about 45-50 Moz had to come off existing stocks at a minimum. Also, the demand side numbers are not reflecting the ETF corrall of more than 10,000 Tons of silver (About 320 Moz) since 2006, the vast majority of which has come from existing above ground stocks.
The exchanges are captives of their patrons. The exchanges and the SEC and Fed, all know that the numbers are questionable and that a bubble or intentional manipulation is being perpetrated, BUT none of them wants to do anything and passes the plate to the next to manage. No one wants to know that the system is running on luck that since no one has seen the metal and claims tally out for years, if ever. Slight of hand by the experts.
Why would one draw physical silver? They have figured out that the government may freeze withdrawals at the moment of truth, and secondly, they know the physical silver is not there if everyone everyone went to the window at once. Some things are just better not known.