manipulating precious metals without owning actual precious metals

I do believe that physical gold bullion is held in vaults by large banking interests and governments. That the object is to control the acutal bullion. These people don;t trade exclusively in contracts. Even the Hunts moved several million tons of silver by freighters to Switzerland back in the 70s.

To get a really good idea of the actual value of a PM is to research it on eBay. Private owners who actually take possession of metals for insurance set a more realistic value for those of us who do trade in them. Say $1 FV US coins has a market value of 20x, but it's selling on eBay for 23x. We can realistically say that we will buy at 23x and sell at 23x losing the commission. I believe online trading is a greater part of the actual transfer of PM's.

Just sayin'

 

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To be clear, The CME Group is not the CME where farm products are traded. The CME Group is the parent company of the CME and Nymex. The CME is the commodities exchange located in Chicago. Nymex is in NY and runs the Comex and the NY Mercantile Exchange. I stated this in This Post. In 2008, the CME Group bought Nymex but continues to operate it as a separate entity.

Because they are so unique, the only thing traded at the Comex are Gold, Silver and Copper. All other metals, for that matter anything dug out of the ground except for gold, silver & copper along with all energy products are traded at the Nymex. Of course agricultural products are handled in Chicago. This should put to rest that Gold & Silver are simple commodities like corn and thus are analogues (as constantly suggested here ) of each other. These futures are so different, they have their own unique exchange.

It is surprising that so many here, who claim expertise and experience with commodities, did not seem to know this. (well.... not really )

 

The price of silver has risen from about $5 to the present level in a little more than a decade. The burden of proof for too low of a price lies with the folks who believe the price should be much higher. The current price is somewhat above the cost of production, so what evidence is there that this price is too low? If the price was too low, there should be shortages of physical silver and stories in the business press about bottlenecks in production caused by the inability to obtain silver. Until those things happen, it seems reasonable to consider the current price to reflect a balance of supply and demand. I know people like Ted Butler believe the price should be many multiples higher than the present, but he doesn't present a convincing analysis for this belief.

 

Yes, the CME group controls all of those markets, as well as others. They operate under the same rules effectively, so any posts stating major differences between the two should be examined for factual correctness.

 

This coming from the same poster who in post #13 posted "Eventually each of those contracts for 5000 bushels gets delivered."

Read more: http://www.cointalk.com/t208467/#ixzz1z06q9JLr

Probably the most laughably, roll on the floor, wrong thing I have ever read on Cointalk. Like Fatima says, everyone should judge their sources for themselves.

 

If they could manipulate LIBOR I have absolutely no doubt they can and do manipulate anything else on Earth.


http://finance.yahoo.com/news/barclays-pay-400m-plus-settle-130159247.html

 

If you believe that post 13 is incorrect, rather than cast insults at me, why don't you explain why this isn't the case? So far the only thing you have told us is that you are an expert because you have traded 400 futures and you have made a tourist visit to the CME. These are not reasons to believe what you have said especially when you left the place not knowing that gold and silver are actually traded on a different exchange in NY and don't seem to understand what a commodities contract represents.

I stand by what I've posted and I don't need to call people names to prove it. I given my rationale above. Address it if you wish to prove me wrong.

 

This is also completely incorrect. it's surprising you continue to make these statements. This is directly from the CME Group Website.

Exchange-Specific Rules for CME, CBOT, NYMEX and COMEX

CME, CBOT, NYMEX and COMEX are independent exchanges, each of which maintains its own set of rules. Although all four exchanges have been merged to form CME Group, each exchange remains a separate self-regulatory organization. In order to provide a common regulatory framework for market users, the CME, CBOT and NYMEX rulebooks have been substantially harmonized, making the rules parallel in structure, numbering and language where possible. Please note that the rules in the NYMEX Rulebook are applicable to both NYMEX and COMEX. While Chapters 1-6, 8 and 9 of the Rulebooks have been substantially harmonized, the rules applicable to the delivery of physically delivered contracts remain unique to each exchange. In addition to the rules in Chapter 7 of the CME and CBOT Rulebooks and Chapter 7A and 7B of the NYMEX Rulebook, delivery rules are located in applicable product chapters.​

It seems pretty clear to me that it is a great mistake to assume that corn futures contracts are handled the same as that for silver futures as you have insisted. This is especially true for physical delivery. I will contend that 100% of the corn contracts are delivered while relatively few are for gold & silver. I will say again that gold and silver are not simple commodities like corn which you seem to insist on even though every bit of evidence proves otherwise.

 

So just to be clear, is it your position that none of the contracts are for hedging or for speculation? Every contract ends in physical delivery to the holder of the long contract? None of the long contracts are offset with shorts? This statement that you made requires qualification on your part to avoid misinterpretation. Can you clarify?

 

First of all to clear up the confusion, there is no such thing as a long contract or short contract. What you have is either a long position or a short position for a futures contract(s). The difference is whether you are buying a contract or selling it.

With that said, I gave a simple example above that explains it so you might want to look back at what I said. if not then I ask you to do some homework. If you are a long and holding a futures contract for delivery of 5000 bushels of corn, and you offset it by shorting it to another buyer, then what happened to the contract or more importantly, the corn represented by the contract? Was the contract destroyed or did it simply end up in someone else's hands? If it was destroyed, then what happened to the corn and its relationship to the exchange? If the contract was not destroyed, then what happens at settlement?

 

I don't trade futures or intend to trade them so I'm not interested in the technicalities involved in the language. It's just that you made an absolute statement that 100% of corn contracts are delivered. In the past you have made statements that required several pages of posts to clarify what you meant, and I'm trying to help avoid that. So I'll ask again, very simply, are you saying that every long position results in a physical delivery of corn, or did you mean something else?

 

The simple answer is No. I said nothing about long positions.

 

The burden of proof lies with the statements being made. I did not assert that you were wrong, merely that you cannot prove you are right. Also, since silver is mined as a byproduct, its cost of production is impacted to the downside. If the price were high enough for primary silver mines to be profitable, then all of the cost of running those mines would fall upon silver, where as today it gets a free ride. Statements can be made to support either line of thinking, but my point was that we can't say for certain.

The fact that we cannot say for certain is also what I was getting at. What are the goals of markets? Price stability and forecasting? Ease of use by those who need them? Hedging? Fair value? It seems to me that the goal is always something other than fair value, when that should be paramount above all others, but people are so concered with turning a profit in dollars that it isn't hard to look the other way when things are going your way. Whether it is undervalued or overvalued is irrelevant, and while I do believe it's undervalued and that is my motivation, it does not have to be everyone's motivation. The point is that everyone should be concerned that the value is not what it's supposed to be, regardless. If it were we would not see such violent moves.

As for a convincing analysis for why the price should be higher, I would simply point out (as I often do) that above ground available refined silver is at its lowest levels in 700 years. This should not happen if price rises to meet demand, since supply has been and is still losing ground. Since paper markets prevent discovery of fair value, and since this trend of supply depletion has been consistent for a century now, I contend there is a lot of catching up to do for price, but that is JMO, and even if I am right that will not happen until and unless the physical market decouples, and that will not happen until there is a real supply shortage. However, the longer it remains undervalued the sooner it will decouple, so if anyone is keeping the price down it's in their interests to allow it to rise enough to prevent a shortage.

 

I don't think it is relevant that byproduct silver can be produced at a lower cost. It's just part of the total supply/demand equation and will apparently remain so indefinitely. The goal of markets is to discover the price at which supply and demand clear, and this price is constantly changing. You are correct that we cannot be certain of anything. All investing is about judging probabilities - the probability of gain vs loss. In my experience, the burden of proof that the market is wrong lies with the person who asserts it. This isn't to say they cannot be correct. All value investing is analysis to determine where the current market price may turn out to be wrong. But the burden of proof always lies with the analyst, not with the market. It may be correct that the above ground supply of silver is the lowest in 700 years, but is that relevant to today? Perhaps the world needs lower silver inventories today since it is no longer used as money. So as long as mine supply is sufficient to meet industrial demand, the price won't rise. I'm not anti-silver. I own silver and expect it to rise. But I don't think the present market price is wrong, and unless the price is fixed at too low a lever, there will never be a shortage. I think the supply/demand situation will continue to move in favor of higher prices, at least for a few more years. But not because of manipulation. Just because demand seems to be growing and supply probably won't keep up.

 

How is it not relevant to the production cost that byproduct silver does not cost as much as if there were primary silver mines? I can't follow you there. I have already explained why the market does not provide accurate price discovery, and that is not disputed. Whether or not that is the goal is irrelevant because it is not the case. Therefore since we can say with certainty that the market is not accurate which suffices for my burden of proof. Now the burden of proof lies with whomever is asserting what actually is the case, and that is where this discussion stalemates.

 

Inflexion, not intending to prolong the argument, but I have to say that both quotes are untrue. Yes, you have explained it, and yes you think that because no one can convince you other wise it must be true, but that is not the case, at least for me. You are not the only one on the forum that thinks the "true" price of silver is being held down, and the "value " is much higher than the market price, etc. but the "true price" and the "value" is an non-existent, imaginary number.

There are several people on the forum who have coins they are convince are worth 6 figures. Some have put them in auction and found the offering much lower than the "value" ( in their head ) and thus it must be a conspiracy to cheat them. This is the same as the silver conspiracy. Silver is worth what you can get for it in the market ( spot if you will) and then if in a person's mind the value is $50 and is being held down to $28, it is a conspiracy of banksters".

One may think or wish the price of silver would be higher, but that doesn't mean it is where it is because someone is limiting it. If spot was $28, and I couldn't find an ounce on the market for $40, I might agree with you, but this isn't the case. I have quite a bit of precious metals and mining stocks, so I am for an appreciation of prices, but this "being held down by the Man" stuff is wrong. IMO. I mean no disrespect, just very difference in opinion.

Jim

 

It is relevant, which is why the true value of silver is lower than what you believe it should be. Prices are set at the margin. Of course if there was no byproduct silver, demand would have to be satisfied by higher cost primary mines, and the price would probably be higher. But byproduct silver does exist, and this will impact the price of silver for a very long time, like it or not. Why should anyone pay $100 for silver when it is mined and sold for much less?

 

So the price of silver, in the last 3 years has ranged from ~$17 to ~$50 and then back to the upper $20s. If the market is providing true price discovery how can these wild swings in price be explained? Certainly it isn't by demand and supply issues because this represents a swing in price closing in on 200% in an economy that hasn't gone anywhere during that same period.

Barring a decent explanation, I think InfleXion's two statements are correct.

(note this isn't a claim that silver is currently priced too high or too low but simply that the market is manipulated. funny thing about manipulation, it works both ways)

 

Take a look at a NASDAQ price chart for 2000 through 2002. It ranged from about 5000 to 1200. Or a Dow chart from 1929 through 1932 when it ranged from about 380 to well below 100. This is what markets do - they fluctuate. Price discovery means that the market is finding the level at which the market will clear all buy and sell orders. That's all it means. You can find similar fluctuations in just about all securities and commodity markets from various time periods.

There is nothing unusual here.

 

What physical commodity does Nasdaq represent?