What happen to the Silver Market?

It very well could go back to lower prices once the economy recovers, as the basis for the rise is the bad economy.

 

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hopefully it will get to a level where i can load up on Monster Boxes

 

Here is an excerpt from Ed Steer of Casey Research, and is what I was posting about on the previous page.

Well, the Commitment of Traders Report was everything I hoped it would be. In silver, the Commercial traders decreased their net short position by a total of 4,679 contracts, or 23,395,000 troy ounces. The net short position in silver is now down to 203.5 million ounces.
Of that amount, the '4 or less' traders are short 191.7 million ounces...and the '5 through 8' bullion banks are short 40.4 million ounces. Straight addition shows that these eight bullion banks are short 232.1 million ounces of silver...which is 114% of the entire net short position. They control the price, it's as simple as that...and if they and their respective short positions disappeared tomorrow, the remaining Commercial traders would be net long the silver market...just like everyone else.
In gold, the Commercials decreased their net short position by a chunky 12,840 contracts which, multiplied by 100, is a reduction 1.284 million ounces. The Commercial net short position is now down to 19.76 million ounces...and it hasn't been under twenty million ounces for quite some time.
The '4 or less' bullion banks are short 15.5 million ounces of gold...and the '5 through 8' bullion banks are short 5.0 million ounces of gold. So these eight bullion banks are short a bit more that 100% of the entire Commercial net short position. Just like in silver, they control the gold price as well.
There are 50 Commercial traders that hold short positions...and eight of them rule the price roost in gold. In silver, there are 44 Commercial traders on the short side...and considerably less than eight of them control the silver price. These are called concentrated short positions...and are flat-out illegal. This is what the COT report was designed to show, but even though it's as blatant as it can possibly get, the CFTC does nothing.

 

Both will go back down to where they were.
The big question is will they return to those levels tommorrow, or next year?
I believe it won't happen for 2 or 3 years myself, but I do know it will happen.

 

So you're of the belief that our current financial state of affairs will somehow be "fixed" or in a better position within the next 2 to 3 years? I'd be willing to bet a tube of ASE that's not going to happen. The reasons I believe this is not reality is while the housing crisis is "calm" for now, it's far from over, and our current economic situation with employment, deficit and other factors make this almost an impossibility.

 

So you agree with me on all points except when it will happen, correct?
The timing is a matter of opinion, and since I don't collect coins for profit, it doesn't matter to me in any respect except when I switch back to buying silver coins from nickel, copper, bronze, keys, etc...

 

Very astute observations.:hail:

 

As I've pointed out elsewhere, between the 84% margin hike on silver in May, and the 16% margin hike yesterday we are now at 100% which I believe to be the limit. If this is not the case I would be interested in knowing what the limit actually is. If it is the limit then they are out of arrows in that quiver, and this would indicate to me one last smackdown to scare people away before they lose control of the price.

 

I don't trade futures so this is just for clarification...

If margin rates are increased by 100%, that does not mean that speculators are forbidden to use margin [i.e., it isn't the same as 0% margin]. There is a difference between doubling the margin requirement and forcing buyers to make all cash purchases.

Does anyone know what the new maximum allowable margin is?

 

I did find evidence of a silver margin hike last November, so that does put it at over 100% total which means they probably aren't at the limit. I can't seem to find anything about what the limit is though. Maybe there is none, and there will just be a theoreitcal point where it's no longer cost effective to play the margins? Still very interested where that would be.

 

A lot will depend on how long the fear remains in investors. The DOW Jones Industrial had it's worse week in trading, and a loss of 738 points, since 2008.

One can hope the market will improve; however, it's declining almost daily.

 

I have a reasonable explanation. Let's see how welcome it is...

It is very possible that the "big shorts" are not naked shorts at all. The large banks frequently trade for their big clients. Some of those clients who own silver [and gold] may desire to earn an income stream from their metal holdings. The shorts by the banks may just be part of a normal basis trading program on behalf of those clients which would appear to be naked shorting and market manipulation to other market players and market watchers who don't really understand what is going on. Since there is no public reporting requirement for clients, there is no way to know for sure.

 

Very astute observations yourself Cloud.

 

Those Autstralian Rabbits pack quite a premium. Why is that?

 

If the margin is increased 100%, it basically doubles. On this last margin increase by the CME, The initial opening margin for 5000 oz silver contract went from 21,600 to 24,975 if you are not a member of the exchange, seems about a 15.6% increase, but still a long way from full price of 0% margin of 5000 oz at approx. $30 ounce , or $150,000 of silver. So the margin is really 16% or so to hold silver contract at this time ( of course this is just for illustration as each delivery month as difference pricing usually).

Gold went from a margin of $9450 for 100 oz. of gold to 11,475, a 21% increase, but still that 11,475 will initialize a contract for 100 oz of gold, and at even $1700 an ounce , that is holding $170,000 worth of gold.

And for those who think margin changes are just occurring for commodities going up, (such as PM), the margin for copper, which has been slowly decreasing, but recently after China's announced slowdown, has dumped, was also raised 17.6% , to protect the CME from falling price volatility.

They can change the margins to whatever they wish , up to full price, but each change will affect the volume and thus their profit, so they have to balance the profit/risks. IMO.+

Jim

 

I should have added, that if you use the numbers above, an $11,475 speculation will allow you to hold 100 gold. When gold went up from 1700 to 1900, $200 oz x100 = $20,000 gain on paper. They are smart, and they will close out many contracts and take their cash and run when they see a downfall coming. Too many seller and very few buyers and the price will sink.

Jim

 

Perth Mint Lunar silver (such as the 2012 dragons that just came out that you can't find anywhere unless you want to pay $100 plus [actually Gainsville has some of these for those who are interested - $121 credit card price]) always commands a higher premium, because they only mint them if people make the purchase. So it has a very low mintage by default. I picked up some 2010 Year of the Tiger coins for $64 less than 2 months ago, and you can't find them for less than $100 retail anymore either (though I'm sure that some savvy ebayers could find it for much less) even with today's spot prices.

 

Jim you are awesome. Thank you for explaining this process. So if I understand correctly, as things currently stand silver's margin requirement is 16% of the total price allocated with $24,975 being required for every ~$155,000 borrowed. Which would indicate that margin requirements can increase over another 600% before hitting the ceiling, and there is quite a way to go still.

 

My figures were rough, but you get the point. The members of the exchange gets to have lesser margins as they are recognized as non-speculators. CME or any exchange can not allow the balance of longs and shorts to get far apart. They do this by using margins which can be changed to reduce the amount of commodity at risk. Almost none of the speculators expect to have delivery PM, they are just in it for the cash ( they hope). So the common thought that there isn't enough gold in the world for the # of contracts would possibly be true if every margined contract was converted to gold or silver delivery, but the full price would have to be transacted about a month before expiration, and that is risking money on an unleveraged bet, so over 90% opt out for cash. It is the nature of the beast that there will enough PM at expiry.

I feel sorry for copper, I think it is in for a long decline ( probably with most base metals) as the world's manufacturing does also.

Jim

 

it's probably due to Greece's debt problem and many people are going to U.S. dollars as safe haven as a result driven down precious metals. that's my guess. i think this is a great time to buy because this down turn will not last. U.S. economy isn't out of the woods either and it will drive the price of silver and gold up and up and up! lololol