manipulating precious metals without owning actual precious metals

Cloud I have already told the moderators of this forum that I won't engage in this level of discussion. It's breaking the forum rules.

As I said before, I'll be glad to respond or have an honest discussion about what I've posted but I can't give you a "source" for how the COMEX works which is what your question entails. Barring that, I fully support your right to believe that only 1% of the corn futures contracts traded on the COMEX are ever delivered. Considering that you didn't demand the same proof that you demand of me, I assume this is where you stand on the matter. Have a good day.

 

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People can believe what they want I suppose. I personally sold 480 contracts for a commodity for 2012 on the CME and I will not deliver a single one. My friend sold about 2800 contracts this year, again he will not deliver a single one. But please, everyone listen to a self professed expert versus those of us with "personal anecdotes". What the heck do we know.

 

So how many of these contracts were for bushels of corn that you were selling? If so do you believe that your activity represents a significant portion of the commodities traded on the futures market?

As we all should know, you can't make a general statement about this without first stating the commodity or security in question.

 

You stated that it is wrong to say that less than 1% of corn futures contracts are physically delivered. I asked for your source. It's okay if you don't have one, but don't try to make my question out to be something else. It was a simple question.

 

Cloud, I submit, you win. Let's move on to something more productive.

 

Yes, let's forget post #13 where someone who claims to be never wrong stated all futures contracts on commodities such as corn ALWAYS gets delivered. Let's just completely forget the whole thing so that the unbroken streak continues...........

 

Average annual world production of corn is about 65.5 billion bushels which equals approximately 13.1 million deliverable contracts. Today @ 11:00 on the CME (1/2 of one trading day) the total volume for (July12-May13 contracts - representing a 1 year period) was 278376. The CME trades what 250 days a year?

 

I think my point though about silver or gold being manipulated by big firms that don't deliver is doesn't that affect people with the actual silver selling when big firms push the price low? Doesn't industry actually need physical silver?

 

I am glad you posted this as I think this is where people get royally confused about the CME and futures contracts for real commodities. They don't realize that when a futures contract is created by someone who owns 5000 bushes of corn they wish to sell on a certain date, that in fact (legally) two transactions take place. The first transaction is the contract is sold to the Exchange. The second transaction is the Exchange sells this contract to waiting buyers wishing to own a corn future and the exchange will buy the contract back for those willing to get out of a contract (before delivery date) to another willing buyer. The volume is simply the number of times this single contract will change hands. It may change hands thousands of times, but there is only one contract in this simple case. In the end, in this simple case, when time comes for delivery, there is still only a single contract representing 5000 bushels of corn. If that corn is never delivered then the contract is worth $0 and people are not in the habit of buying something that is worth nothing. The party holding the contract at delivery will have to deposit the remaining amount so the farmer can get paid for his corn.


Now relevant to this topic and why this discussion took place is that with silver & gold, there is no product with a shelf life.

 

The intention of the market is to financially hedge your risk, not physically. If you need silver, and today's price looks appealing, you would buy today for "delivery" in the future. Let's say today is $27 at the CME and you can buy locally for $27.50. So if you buy on the CME, you are really locking up $27.50 cost of silver. When the contract comes due and you were right and it has moved up to $32 on the CME, you sell the CME contract and make $5 per ounce. You buy locally for $32.50, subtract the $5 profit from the CME, and yoru cost per ounce is the same $27.50 you wished to lock in.

Commodities for the most part are too expensive to ship numerous times, this is why commodity futures markets are really financial hedging and price finding operations, not really intended for physical delivery. If all of these commodities had to PHYSICALLY go to chicago, be stored, then delivered out of chicago, it would be a bloody nightmare, (as well as logistically impossible for some commodities).

Big firms selling are offset by big buyers buying, with speculators in the middle. If someone really believes the big firms are overselling, put your money where your mouth is and buy.

 

If by CME you mean the Chicago Mercantile Exchange, the place where you also said this:

"However, I am in agriculture, and just spent 2 days AT the CME talking to traders, CME officials, etc. Everyone else here should take that into account if they wish to believe you over me or others with real experience in these markets....I am not saying I am smart, just have pointed, recent experience. I was physically able to ask CME officials these questions, something which most coin collectors do not have the chance to do. " This Post

Then you probably didn't realize that gold and silver futures are not traded as commodities at the CME in Chicago as your post indicates. The CME is for agricultural commodities which you correctly noted. Gold and Silver futures are bought and sold at the Comex which is part of Nymex in New York City. Nymex is owned by the same company that owns the CME, but it's a completely different operation.

 

If the big institutions have been trying to manipulate the price down over the past decade, they haven't done a very good job. I've read all of the usual stuff about manipulation but remain unconvinced. Of course the industry needs physical silver, but it doesn't have to run through the futures markets to get from mine to industrial user.

 

I have put my money where my mouth is and bought. I do buy junk silver though and sometimes end up with something with numismatic value. From what I read, some big firm in Chicago sold of a ton, lowering the price. Of course though when prices spike, everyone sells lowering the price. My point is, big firms may not own physical gold or silver but many individuals do, what if they just not sell? What happens then? What if a million people own a physical bar or two but refuse to sell it? Doesn't this affect price if industry needs those?

 

Probably not. People who own the bars have had them off the market anyway, so it is figured into the market price. There will always be someone who bought much lower and finds the current price acceptable and sell. Some numismatists bought hoards of silver coins at face or below say $10, and now the price is looking good for them to sell. Others who bought at $32 are trying to invent reasons it will go to $50+. Do you think the majority will continue to hold at $50, even if it slowly started dropping 25 cents a day? I don't think many would, but IMO. A friend was selling 90% US Coins at 80% spot for 90%. I looked oddly at him, and he said, I got it at face and don't intend to be buried with it, I am buying a new Escalade. So everyones situation and desires may be different. For every buyer, there is a seller, and VV.

Jim

 

Yes, it would affect the price by at least a tiny amount. If many millions of people bought and held a lot of silver, it would affect the price more. I heard similar logic regarding tech stocks in the late 90s -- they wouldn't go down because individuals wouldn't sell them. It might work for a short time, but eventually people do what is best for themselves and not the group.

 

But the small dribs and drabs of ASE's and junk silver people own are not the major sources we are talking about. Mines produce massive amounts of raw silver every day that needs to get moved to end users. Coin collectors not willing to sell junk silver is not really a consideration.

Yes, if mines stopped selling it would be a major issue, but that cuts both ways. If they stop selling PM for a while then industrial users will find other things to use and long term demand will fall. These prices are really about mines hedging their future production, and large consumers hedging long term input costs. If Chris decides silver is too cheap and I will not sell 1000 ounces of junk silver, I seriously doubt anyone cares. Btw, I put my money where my mouth is too, and bought 20 years ago heavily and buy junk occasionally for fun still.

Btw, I didn't mean "put your money where your mouth is" to be snarky or directed at anyone in particular. Its just many people on internet chat boards love to bemoan or rail against something as long as its not affecting their pocketbook, as soon as you talk about THEM doing something about it, they are not so brave.

 

Yes the industry does need physical silver, which is highlighted by the fact that over the last 100 years the industry has used up the entire world's silver surplus putting supply levels at their lowest since the 1300's. However since the industry can hedge they do not have to care about the price of metal. All they have to do is flip it for a small spread, and the hedging cancels out the rest. This is all fine and well as long as there is enough supply, but should the day come when there is not they will wish they had bargained for fair value prior to the depletion.

I'm not following how you can substantiate this. Just because the price has risen doesn't mean they haven't done a good job of holding it down if that was indeed the case. It all depends on what the price should be, which is unknowable. I have also gone into detail in previous posts about how the very nature of the futures market is manipulative, not even pointing out all the evidence from GATA, and nobody has refuted what I've said.

 

I would agree with you sir that futures markets by their nature can be manipulative. However, I would only do that if the manipulation was implied it could be either way. Buyers using leverage is just as manipulative as anything sellers can do, so everyone needs to always be aware manipulation cuts both ways. I simply say that since in the silver market the word manipulation seems to be synonomous with price suppression.

 

Technically speaking, any market is "manipulated" by even the most minimum of sales relative to the size of the market. Illegal manipulation occurs when an entity or person breaks the law to cause price changes. Naked shorting is an example. The manipulation may not even be illegal, but uses unfair advantages, such as taxpayer back stopping to achieve a goal. No doubt the discussion here is about the latter two and not the former.

It should be pretty clear now that selling corn futures and selling silver or gold futures are quite different. This because this activity happens on completely different exchanges CME (corn) vs Comex (Au & Ag) Someone should not look for a pit boss at the CME to tell them about events at the Comex.

Furthermore sellers on the CME use the market to find buyers for their physical products, i.e. corn, because they WANT to deliver this product. A farmer goes bust if he can't deliver corn to a buyer. 100% of these contracts get delivered. In contrast bullion sellers on the Comex may or may not need to deliver a product because gold and silver bullion does not have a shelf life and it's very expensive to move. Settlement can be nothing more than cash or notational changes in a bullion vault. The motivations and goals of participants are quite different which is why the Comex has remained a separate entity just for these metals.

So in terms of manipulation, where the party most likely will not need to perform delivery, there is a huge opportunity to engage in illegal or wrong price manipulation on the Comex that simply does not exist at the CME. It takes careful regulation, enforcement of rules and laws, and a commitment by the taxpayer backstopped banks not to take unfair advantage of the system in order for it to work properly. If people wish to believe this is all working as designed it's their business. IMO, the finance system has not demonstrated in any way that it is operating at a trustworthy level.

People buying silver for the short term should take care not to travel into this minefield with rose colored glasses on. It's your money so do the research yourself. Don't listen to anecdotes and self proclaimed accolades unless these people are willing to cover your losses. Don't just listen to me. However everything I posted above can be easily verified by doing a little reading. In no way do you have to simply trust what I am saying.

 

Try this url, you will see that CME includes the COMEX.


http://www.cmegroup.com/
and from the COMEX part of the above :