Silver prices

So I was reading how they were discussing trying to open up a tracking fund for copper. A few groups are looking to do this. The major issue right now is from copper users, who are trying to block it by saying it will add significant volatility and major price increases into copper because of all of the influx of investment money into a commodity.

My question, (not trying to be a smartaleck), is isn't this really where silver and gold are right now? People try to justify their positions, (especially with silver), by saying its industrial demand that will increase the price, yet industry is saying its investment dollars that artificially inflate prices on commodities.

I was just wondering on people's take on this.

 

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I've never heard anybody say that silver prices were artificially inflated. I can understand the opposition to a tracking fund. It doesn't have to purchase any copper, so virtually every dollar that goes into it increases the price of the commodity because of the offsetting purchase of futures contracts.

 

It's a good point. Where would silver prices be if there weren't hundreds of millions of ounces sent to ETFs during the past few years?

 

When the day comes where central banks & governments hold 1/3 of the known supply of copper in their vaults as they do with gold, then it might be possible to compare it to gold in regards to justification. When copper gets to the point where a select group of bankers get together to "fix" its price as they do with gold each day, then it might be possible to compare it to copper in regards to justification. (and for anyone buying from the US mint, the price of coins is set directly from this "fix" price)

My advice as always: Never listen to bankers about investing. Instead watch what actions they take for themselves.

 

I don't disagree gold is somewhat different.

Regarding the "fix", just to clarify to others, all this is is a group of dealers determining the daily price based upon news events and other markets actions. Please do not take the word "fix" and think in connotations that this means they are manipulating the price. Its a old market word in England meaning set the day's price for a commodity, with no relation to negative connotations.

 

The "fix" is what it is. I don't see anything negative or positive about it since it was given in regards to how prices are justified. The London gold "fix" is set twice each day by at N M Rothschild & Sons London HQ by Scotia-Mocatta (part of Scotiabank), Barclays Bank, Deutsche Bank, HBSC & Société Générale. The price directly determines the price for large trades of gold held by these banks and their big customers.

Most all other prices for gold in the world are determined by this action.

As I mentioned earlier, the US Mint directly sets the prices for its gold coins from this "fix" price. (usually the average of the 2nd fix price over the last week). This includes the AGE, Buffalo, & First Spouse coins.

This is why gold pricing is different from every other metal.

 

I never said you did. I was simply clarifying for others since a "fix" is usually connotated as something is illegally being manipulated, (as in "the fix is in" meaning the outcome of the fight is preordained by someone cheating). I just wanted others who may not know that to be knowledgable on that point.

 

edited ~ political -forum rules

 

This is what they call it. They fix the price of gold for their customers 2X/day. It's not illegal but if the definition of a price manipulation is to set a hard price, then manipulation it is. The effect of it is that the world's gold pricing is set basically "fixed" by 4 European and one Canadian bank. The "spot price" what influences most everyone else, except buyers from the United States Mint, will rotate around this "fix" and the "spot price" can influence the "fixed" price if its orbit gets too large.

On the other hand, these 5 banks can't ignore the market because doing so would either affect their profits or supply of gold as a negative to them.

 

A lot probably would have gone to other ETFs, but a lot probably would have gone to physical silver as well. No way to know for sure how it would impact the price, but I can say one thing for sure, the ETFs certainly enable the massive price swings which would not otherwise be possible if the physical metal had to exchange hands.

 

Why is the London gold fix relevant to a copper tracking fund?

 

In this case 'fixed' means 'static', not 'rigged' - two different meanings for the same word. They merely set the price as a mechanism of exchange. Whether or not it is also rigged is another story.

 

I thought the HKME ( Hong Kong Merchantile Exchange) was going to be increasing the "freed silver prices" once they took all of the bullion business away from the CME. It has been operational for over a year ( May 2011), and ...............

 

I'd have to think about that one. The only thing the ETF does is continually print a bid and an ask price. So I'm not sure it makes the price more violitile. It just makes the volitility more visible.

 

This might be another case of American English having a different meaning for the word "fix." When I worked in insurance, our contacts in London called their products "schemes," which sounds a bit devious to an American.

 

Well the copper producers are saying this extra activity where funds can flow in and out quickly on a small portion of the physical quantity will have the effect of driving up the price on the entire supply while only really being applicable to a small subset of supply. They say this will have the general affect of increasing long term the price of copper, while short term lead to more volatility.

That is what they say. I was just curious others thoughts, as well as if this is already happening to silver especially. If it is, I am not sure how industrial demand really affects the price if its the financial markets that is generating the price discovery mechanism.

 

The question that was posed by medoraman relative to copper prices was this:

[highlight]My question, (not trying to be a smartaleck), is isn't this really where silver and gold are right now?[/highlight]

Thus a discussion of gold, and how it is priced, is warranted to understand why or why not it applies to whatever is happening with copper.

 

What I find funny is how every week on Thursday or/and Friday here lately Silver has gone up and then Sunday night/Monday Silver comes back down. Things that make you go Hmmmmmm?

 

I think their concerns are valid for a tracking fund, but not for an ETF that must go out and acquire physical metal.

 

The difference is in the tracking fund concept, which has nothing to do with central banks or the London fix.