Silver Lease Rates are Negative again.

Naked paper silver is exactly what the "raiders" have always dealt in.

102 million ounces is one heck of a position to lessen. That's over $3.5 billion worth of silver. There are only a couple of entities that can absorb that much risk. Even that much leveraged paper can cost a significant chunk of change. And the 7-minute window leads one to believe it's from one entity.

 

Log in or Sign up to hide this ad.

Those contracts are supposed to represent allocated silver. If they don't then the law is being broken. The reason for the leased silver is so that paper shorts can be created that point to silver that is allocated, but which most likely can't be delivered. I don't know who leases silver, but gold is IMO coming from the central bank. The party creating the shorts are taking the gamble that they can place enough contracts on the market to drive down the price and hence force the longs to settle for the difference. The gamble fails if enough buyers show up and buy all the shorts. In this case, at settlement time, longs standing for delivery where there is nothing but leased silver usually get paid a very nice premium to settle for cash instead. Cash which they can get for no cost from the central bank.

This is why it is called a raid. The purpose of the commodities market is to efficiently match up buyers and sellers for perishable commodities. The finance community has perverted its mechanics to fleece PM buyers and to keep prices suppressed.

 

This might help with the confusion. The spot price of silver or gold is the price that it costs you today to take delivery of a standard contract of silver or gold. These are generally 1000 or 5000 oz for silver and 100 ounces for gold. There are numerous places where you can purchase either for spot.

A futures contract, what we are discussing here and what is traded on the Comex, is a contract to buy the same contract at a future date. The purpose for the futures market originally came from farming commodities where farmers could line up buyers for food crops, meats and dairy before these commodities were actually available. It helped to smooth out the financial aspects of producing something that is seasonal.

What has happened however is the banking system has perverted the futures market to create paper gold and silver. By leasing either, they can create unlimited contracts for both that far exceed supply and hence drive down the price and/or fleece people who get into it.

 

Thanks Fatima, it still makes me wonder how they can sell futures when there isn't enough commodity to cover the contracts. I understand how inclement weather and such can cause the futures on produce to go up. I guess they are selling futures on PM that hasn't been mined.

 

...and what folks don't talk about much is that you don't need physical silver to balance contracts...you just need money. It's a market...meaning, folks are trying to make a return on an investment. Once they're offered enough money for their contract, they sell (in fear someone else will beat them to the punch). All the people that whoop and hollar about there not being enough silver to cover the contracts simply don't understand the futures market. I'm far more concerned about cyber attacks taking down the financial system than naked shorts.

 

The contracts being sold were not "delivered silver contracts". Such contracts are different from being long or short on paper contracts. You can buy a "paper contract" on a percentage of the full price for the delivered amount ( called the margin) and you gain or lose depending on whether silver goes up or goes down and the settlement is in cash. So no ounces of silver are bought or sold by this transaction, contrary to what most try to make it seem.

If you want a delivery contract you must put up the full price for the total silver or gold. This may be done by doing this initially or by converting a "non-delivery contract on margin" to a delivery contract by paying the remaining cost before a certain time limit. If you have paid the full costs, then you can take delivery and the metal will be delivered.

You can not buy a contract on margin, and decide after the cutoff date to demand delivery. You are out of luck! If you don't pay the maintenance fees when you are on margin or if the margins go up, you are out of luck. You only get the metal if you have paid all up front which gives the exchange money to obtain the gold/silver for delivery to you. The price of the delivery contract will be determined by the spot ( depending on what "numbers" each exchange uses ) at the time of finalizing the contract.

If you are a user of silver, you will generally finalize the price when you initialize a contract, as you do not want any surprises to the upside cost. You may moan if the price comes down by delivery, as you have already settled, and you don't get the difference back. If you wait until the last chance, you have a better chance of knowing the price, but if you need it, you need it.

If you are a speculator, you can either buy on margin and then sell that contract ( non-delivery ) before expiration and pocket or lose the cash difference. ( This a paper trade, no metal changes hands), or for small timers or for more leverage, speculators can buy puts or call options on SLV or GLD ( leveraged paper) based on +/- changes in the price of the stock before expiration ( Again , no metal exchanged). With SLV and GLD, metal is only exchanged in baskets by "principles" trading stock for metal. The average investor can not do this, so unless you are a "principle" like the big banks, you can not demand metal for your shares, it is settled in cash.

So, when people want to make it appear that all of the metal dug in the last decades traded hands in a day, they are extrapolating the paper settlement amount to physical metal. Like comparing orange flavored water to real orange juice.
IMO, I apologize for the length.

 

And yet the price of golden apples is driven by this orange juice nonetheless, so the supply and demand forces that control the price are skewed.

 

Huh? :scratch:

 

Ok, I surrender. It was a raid, and paper silver and metal are the same, There isn't anymore silver left for anyone.

I do realize people will believe what they want to believe and little can change their minds. When I taught human anatomy to college nursing students including older adults, you couldn't imagine the number who believed that you could tell the female/male skeleton by the number of ribs. I showed them x-ray after x-ray, had them count their own ( those that could feel them ) and still, they were sure I was wrong.

 

Indeed. The topic is about the silver lease rate (assumes delivery contracts) and how that affects the price of silver, and your response is that you simply don't believe it. I couldn't follow your argument above as it didn't seem to have anything to do with this aspect of trading but I admit, that I'm sometimes very slow to figure these things out.

People can say what they like, but it's their actions and results that really matter.

 

Why? In which direction? Where is the proof? Is it all of the margin buyers skewing the results, or just the sellers? I am simply asking how are you "knowing" it is "skewed" if both sides are using leverage? Again, it just seems the sellers leverage is evil, but buyer leverage is innocuous and pleasant. You say more is traded in a day than a years worth of production. Isn't the buyers just as much at "fault" as the sellers in such a market? If sellers are "lying" and selling more than they own, aren't the buyers "lying" and buying more than they can buy?

 

well i wont go into uncle spocks age but i never had a car. never thought i could justify the expense but i am broke now so it was probably a good thing

 

This is very true. For many people, there is a giant chasm between objective reality and their perception of reality. For some, PCGS is better than NGC, or vice versa. For some, gold is better to own than platinum than silver, etc, for various reasons or vice versa. I remember a few months ago when platinum was really lagging gold and many were speaking of the demise of platinum because it has primarily an industrial use, whereas gold has both a monetary and industrial use, etc., blah, blah, blah. Well, guess what, platinum has made quite a comeback.

This particular thread has been fairly humorous, as it began a week ago today. At that time, silver was $34.50 an ounce. Today, a week later, it is up over 7% from that day. However, some were claiming silver was going to begin a decline at that time, due to various theories and their perception of reality.

The point is this: it doesn't matter what we think or what we know or what we think we know. What is going to happen is going to happen regardless. When it comes to predicting the future, all of the hypothesizing, postulating, theorizing and pontificating we do is really nothing more than breaking wind. Hopefully, when we do it, we do it for the entertainment of others and of ourselves because that is pretty much its only useful function.

 

I can only speculate on which direction, I don't know what the underlying contracts are. All I know is that the price of apples is driven by oranges, because silver is not made of paper or computer data. Buyers or sellers, it doesn't matter who's doing what. The price is not reflective of the physical market when leverage is involved. My point is not to say that silver is undervalued or overvalued. People may make that determination on their own. I am merely saying that it's not a real silver market. If it were the price would not be so volatile, because supply and demand is consistently predictable.

 

Where was this stated in this topic? The topic is why were silver lease rates made negative? To put this in the proper perspective, this means that if you lease silver then you can hold it and give it back to the owner and they will pay you a profit. If silver is in fact rising in value, then this makes no sense. It makes no sense in any case. Why lease anything where you are guaranteed to lose money? Easy answer, making money isn't your motivation.

The chasm of reality vs perception of reality is demonstrated by the constant inability to answer a relatively simple question and thus spend endless time arguing something that wasn't said or asked for. Humor can be a defense mechanism. You may wish to investigate this.

 

I think sir if you look back at when there were physical only markets that this was not true. Physical only markets are notorious for their volatility and people trying to corner them to drive outsized profits. Basically every aspect of the current market was designed to curtail the deficiencies in physical only markets.

As to supply and demand being "consistently predictable" I am not sure of that. The silver market has seen dramatic changes in demand and supply sources the last few years.

As always Inflexion, I was responding to yoru posts more as a discussion point than pointedly disagreeing with you. I know you understand a lot of the points I brought up, but not everyone reading this does.

Chris

 

The first page.

When a bank has a need of dollars/euros that outweighs their need to hold gold/silver, they're willing to boost their currency stores by (drum roll please) leasing out gold/silver at a cost to them, especially when the demand for borrowing gold/silver is low. No manipulation needed!

Why so serious?

 

I often repeat myself for the sake of others as well so no worries Chris. What I mean by consistently predictable is that you can look at the mining supply over the course of a few years and the demand over the course of a few years and do trend projecting. It's not going to be perfect, but certainly does not justify 50% price swings as we have seen on multiple occaisons now over this bull run.

And you are right that physical markets are susceptible to being cornered, but so are paper markets. The difference is that it's being cornered with the actual asset instead of a representation of that asset. I understand that the futures market is a good thing for people conducting business with a particular asset so that they can protect themselves from price instability, however this has become the mechanism for price instability in today's markets. Besides, if somebody wants to corner the market, I say let them if they want to. It's within their right as an individual to do what they want with their money. What's not within someone's right is to impact the price of something by buying or selling a proxy of it, in my opinion of course.

 

And at today's margin, 20,500 contracts requires $440 million in capital. Given that this would probably be a small percentage of this speculator's size, I think you have to suspect someone BIG.

 

We can disagree on that point. I simply do not see how the current markets are cornerable, (which is the intent to begin with). I dislike any cornering, as it deprives the economy of proper price signals. Since a physical only market is cornerable, that is why I prefer the current markets.

Again, if the current market prices were false, why isn't silver selling for $100 an ounce today? Why would the major producers sell on the exchange ever? That is my retort to those who say the market is artificially low. The producers know what the "street" price is, why wouldn't they go around the market and sell direct instead? Its the same with those who wish to believe a new Chinese market will show "the real value of silver". I simply believe the real value is the market long term, and most of the volatility has to do with oil prices, consumer sentiment, and industrial demand at certain price points. Maybe I am just naive.