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Silver prices are now getting ridiculous
Wednesday, October 15, 2008
We were out for a good part of the day today, so, I called into California Numismatics' 24-hour toll free recording to find out what happened in precious metals markets. What I heard was quite shocking and the chart below only tells half the story of how the gap between paper prices and physical prices is widening almost daily.
What you see above is the CNI buy price for 100 ounce silver bars going back more than two years - obviously, things have changed quite dramatically in just the last month or two, a trend that was set in motion in March of this year around the time that Bear Stearns was rescued.
The gap between the price of 100 ounce silver bars and "paper" silver is now around two dollars an ounce!
That's if you want to sell your silver to them.
If you want to buy silver, well, that's been pretty difficult lately as they've been out of 100 ounce silver bars for some time now. But, apparently they've located some one-ounce silver rounds that they'd be willing to sell to you ... for four or five dollars over the spot price!
Of course, in futures markets today, silver was pummeled once again, down almost a dollar to just over $10.
Amazing...
11 comments:
Das market is broken methinks.
Tim,
That growing spread between spot silver and SLV looks very bad. How do you explain that? Almost a dollar now?
Dunno - it's not good. It should go up by about the amount of the SLV management fee of about a half percent per year.
I wouldn't be surprised if it goes back down since the prices are captured at different times of the day on Friday - London close vs. 4PM in NY. Over the long-term, these difference should average themselves out.
The gov't may be contemplating confiscating silver in order to stablize markets. That would explain the premium of the physical over the paper.
Silver futures threaten to break below $10. Yet at a coin show last Saturday, the bid for ASEs was $18, offer at $22. Somebody's playing games somewhere.
Confiscation? Not going to happen. There is too little silver to even begin to cover a tiny fraction of outstanding paper money, not even enough gold in the world to cover it, even though nearly all the gold ever mined remains after 5,000 years of mining.
No one is playing games, actual silver in the hand is bringing more than a promise of silver on paper or in someone's warehouse.
Just like apples or motor oil.
Right now, more people than usual want it in hand, is all.
Someone named Jurg Steiner predicts default in the paper market for prescious metals,
"Within the gold complex, there is a disparity between the paper market and the physical market, notes Jurg Kiener, CEO of Swiss Asia Capital. ... paper market collapses, gold prices may double very quickly."
http://www.cnbc.com//id/15840232?video=880574352&play=1
I think the problem is just one of volatility. A big day used to be when gold and silver moved a full percent. Now we have days when gold and silver move 5, 6, 7 percent in aday.
I've never actually bought the physical metal, but I believe they quote a $$ price?? They widen their spread because they don't want to get stuck on the wrong side.
Its the same with banks on Forex. If you're changing only a few thousand, you get the morning or afternoon fix, which includes a comfortable spread for the bank so that they don't get caught out. When you get big currency moves like we're seeing now, banks either wont deal with you until they get a live quote, or they increase their spread.
No, Paul it is definitely not just volatility or differences in pricing based on the time of the day - these get filtered out using a moving average and this is a long enough data series (two and a half years) that the trend is clear. Like many other coin shops, heir pricing has changed in fundamental ways - physical prices are now much higher than spot prices.
The retail physical and COMEX futures are entirely different markets. COMEX participants are typically near-term focused and employ varying degrees of leverage while retail physical buyers tend to be long-term focused buying with cash. The paper market can go wherever it likes at any given time but eventually has to reflect the overall physical trade. BTW, Fleck thinks we are in for a big move soon.
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