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<p>[QUOTE=&quot;qsilver007, post: 1472178, member: 34667&quot;]A problem with any producer/farmer hedging in the futures markets:</p><p>Back in the 1800&#039;s when the CBOT was started, the Farmer (as the CBOT started as grains only) could put up hi physical supply as collateral and get 100% margin.</p><p><br /></p><p>Fast forward 100 and some years.&nbsp; Dodd-Frank, and many other new finacial legislation pieces havecome out to try and cubr &quot;speculation&quot;, but they only are concerned about this in the COMMODITY MARKETS.</p><p><br /></p><p>Why?&nbsp; Because if APPLE, the DOW, the SP, or some equity goes up, it is looked at a friendly to the general public.</p><p><br /></p><p>Currently, in the grain markets, unless you have a receipt at a valid delivery point, you can look at the CBOT/CME website, it does not matter if you have 1 billion bushels of corn on your farm.&nbsp; If you sell futures and the market rises, the farmer ho sold will get squeezed via margin call and will end up having to buy back his hedge.&nbsp; Many rural banks used to do some of the hedging thru bigger brokers ie Cargill/ADM, but after 2008 they did a lot less, and many stopped alltogether.&nbsp; Also in Grain Markets, the futures curves are not like the metals curves,&nbsp; in recent years as there has been less grain around than expected, the front months (month before the farmer can deliver his crop) trade at a premium.&nbsp; The harvest month generally trades at the lowest future price of that calenedar year.</p><p><br /></p><p>Now to the PM&#039;s.&nbsp; The futures markets as well as physical have a natural carry involved, in silver it is currently 2-3 cents per month and gold is 1.5-2.0 er month.&nbsp; This makes sense as 1 million or billion of PM takes up a lot of space and must be secured, insured etc.</p><p><br /></p><p>Precious miners hedged heavily from the mid 1990&#039;s til about 2011.&nbsp; The parabolic rise in metals, last yer was in part due to fear, Greece, SP downgrade, etc, but it was also some of the bigger Gold and SIlver miners lifting there hedges, because emotions got the best of them and they felt 1900 and 45 were too low.&nbsp; They were also under seve margin pressure from there banks, as the have the physical, but unless it is in bar form, number and registered thru one of the acceptable refiners it does them no good.&nbsp; SO believe it or not, it was many of the largest Gold and Silver mineres that were buying back short calls and futures hedges last year.</p><p><br /></p><p>Also I saw someone mention WTI Crude.&nbsp; Crude futures are down this year, but gasoline futures are still up slightly.&nbsp; The parabolic move in Crude in 2008 was again, end users and producers lifting there hedges as they did not have there Oil in Cushing, Oklahoma where the contract is elivered.</p><p><br /></p><p>Conclusion: Futures markets and Paper markets will contunue to dominate and set prices for every major commodity.&nbsp; Governments will continue to craft ways to but &quot;speculators&quot; in Bull makrets, but as prices go down, they have achieved there goal.</p><p><br /></p><p>The US does not have too much ammo in its so called &quot;Money Bazooka&quot; anymore, so all they can do is instill fear in funds, funds sell there commodities, buy bonds and voila, inflation is curbed and the funds have done QE 3, QE 4 etc for the US.&nbsp; These are facts, and some of my opinions I hope this helps clarify some things for those unfamiliar with the futures markets[/QUOTE]</p><p><br /></p>

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