Don't buy at these premiums, are you nuts?!

Howdy folks,

Good discussion. The divergence between spot and street POG and POS is what happens when you have an artificial price. Either supply dries up or premiums go up or both. We're seeing both. It's not anyone being evil and even exploitive. It's just the nature of the beast.

Same thing happened in the 70's when Nixon put price controls on gas. All of a sudden every station was out of gas. Same thing has been happening with the credit market and interest rates (i.e. the price of money). Fed has them so low you should be able to get a 30 year mortgage around 2% or even less. Not a chance, sucker, the bank doesn't have any money at that rate. Now if you're willing to pay 4-5% - well all of sudden they found some money. feh.

With the advent of the bullion ETFs on top of options and the entire paper bullion market, the POG they imply is subject to the market and so many, many things (e.g. in every other currency in the world gold is near an all time high). It's a Paper POG. It's artificial. Folks look at their physical gold and silver and say, 'hell no, it's worth more than that'. Now if you're willing to pay the Real price (i.e. higher premium), I might be willing to part with some.

You can actually play this, sort of, by investing in both - physical and paper bullion. You can also buy mining stocks, either individually or in funds.

And good luck and damnit, stay safe,

peace,

rono

 

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But this is an EXOGENOUS and BLACK SWAN event -- The Virus -- which is not like a supply or demand shock or price controls.

Fundamentally different !

They weren't really out of gas, it was more rationing (closed Sundays; odd-even plates, etc.). But yeah, when you restrict the price you can charge you get shortages and lines.

You can get a mortgage for about 2.50-3% or so. But the mortgage rate is sticky to the downside because of 2008-09 (defaults) and banks don't want to own illiquid assets like homes. So you won't see ngative mortgage rates here like in Europe.

 

Same thing that so many claimed when it fell from 45ish before. It's the go to line to justify the higher selling prices hoping that it bounces back quickly and the line works.

It is true in the sense that the added premium being pushed for silver is absolutely artificial and will crash if spot doesn't go back up in the near future

 

2020 will be the first year I have bought no PM at all. For a number of reason - including fear over job loss (Corona), needs to spend money on other things right now, and the premiums being charged. Spot always seems to work one way - when you sell, not when you buy, and it more extreme right now.

 

So true

 

I pretty much agree. However, remember, it is only March. So things might change in the next few months.

 

Many, many things are guaranteed to change in the next few months. I'm pretty confident the PM market landscape will be among them. Sure wish I knew which direction it would head...

 

It's sure not like the 1970's.

You have had a market crash....a global pandemic....dislocations in financial markets....a COLLAPSE in quarterly real GDP that dwarfs the (annual) 1932 GDP decline.

And still....gold just pretty much sits there like a lump on a log.

 

Since the spot is set based on future contracts which the JPMorgan and foreign banks use to set the "spot" number. If the future contracts move up, spot will move up, and reverse. Theoretically they could move it either way as much as they like...until buyers/sellers start affecting the futures, by not buying until it gets low and selling when it gets high . Hoarding is the wrong thing to do if one wants to make money off the metal market. The bullion market was primarily for jewelers, industrial users, etc, until the Hunt Bros got smart and was beating them and so laws were changed. IMO, Jim

 

The market sets the price.

If JPM or foreign banks (which are TERRIBLY capitalized and the last thing they can afford is to speculate on metals pricing) move the price too high, they'll be forced to buy....too low, they'll be asked to sell.

Most banks do not deal in the metal, they are CUSTODIANS for other clearing firms. You have speculators (hedge funds, metals funds) and operators (gold miners, other users of metals like jewelrs, etc.) all interactiving.

The Committment of Traders Reports are a good way to see which way they are leaning.

 

I buy a lot of silver when things are normal but things aren't normal now so I buy a lot of beer and vodka.

 

Howdy folks,

Indeed, this is the penultimate black swan event unlike any other we can remember.

I'm using the analogy of a price controlled artificial market because that's what it looks and acts like. If it walks like a duck . . .

The simple fact is that there are two markets for precious metals - paper and street. They are not the same and while they are linked and should track each other closely, at times they diverge. That's when things get interesting. That time is now.

What people believe is more important than what's true and factual. If they all believe a lie to be true AND ACT AS IF IT IS, it might as well Be true. It's true that the POG and POS are $1588 and $13.90. No one that's buying or selling bullion right now believes this to be true and they are acting as if it isn't.

and so it goes,

peace,

rono