Backwardation and the fall of the bankers

I think silver is rising on speculation, chiefly speculation of a new metal ETF, at least that's what I have heard. I also hear the market is cornered by one or two big traders. To me this isn't necessarily bullish, such news come out near the end of a move.The 1979-1980 rally ended with the Hunt brothers going bust.
But of course silver can still double only to collapse back to where it is in a few days just like in 1980. However it's getting really stretched to the upside here and could be near a longer correction/consolidation. This is a market of sheeps, just like all the others.

I think the failure to delivery story has been around for ever and is part of the old gold bug argument for much higher precious metal prices. Silver remains an industrial metal, with emerging markets close to a slowdown, I don't see how silver will sustain those prices in the medium term let alone the long term. The only unknown and potential risk to me is if we go back to some sort of gold-silver standard. From what I understand this is nearly impossible from the point of view of decision makers, so it won't happen. But if you think otherwise let me know.
 
Quote from trade2live:

I think silver is rising on speculation, chiefly speculation of a new metal ETF, at least that's what I have heard. I also hear the market is cornered by one or two big traders. To me this isn't necessarily bullish, such news come out near the end of a move.The 1979-1980 rally ended with the Hunt brothers going bust.
But of course silver can still double only to collapse back to where it is in a few days just like in 1980.

I think the failure to delivery story has been around for ever and is part of the old gold bug argument for much higher precious metal prices. Silver remains an industrial metal, with emerging markets close to a slowdown, I don't see how silver will sustain those prices in the medium term let alone the long term. The only unknown and potential risk to me is if we go back to some sort of gold-silver standard. From what I understand this is nearly impossible from the point of view of decision makers, so it won't happen. But if you think otherwise let me know.
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Troughout each bullmarket in commodities these last 2 centuries each individual commodity reached a new nominal high.
 
yeah I think there is a very good chance silver will rise just above $40 . btw what was the exact top ? It shows around $ 40 on continuous futures charts but articles of those days mention $50 + prices for silver .

As for the inflation scare, I just looked at a CPI chart since 1950, silver exploded right at the CPI peak but did nothing in the fist half of the seventies when inflation was skyrocketing.
Today, official CPI is doing nothing and unofficial inflation can't really be said to be skyrocketing yet. So the silver move can not be entirely explained by inflation , there is a lot of speculation .
Unless we have massive asset inflation instead of massive consumer price inflation , asset prices will not continue the current huge rally, and in any case will eventuall collapse.
 
Quote from trade2live:

yeah I think there is a very good chance silver will rise just above $40 . btw what was the exact top ? It shows around $ 40 on continuous futures charts but articles of those days mention $50 + prices for silver .
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I believe the top was around 50$ an ounce...

But you could only get around 30$ an ounce in coinshops cause they were terrified ending up holding the bag...

Today premiums are the other way...

You get payed above spot to bring in your coins.
 
Quote from trade2live:

really ? why ? what makes dealers so confident ?
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I guess it's just a sign of tightness in the coins market.


You got payed a 5% premium for your golden coins over here when the Greece crisis broke out in full, when it calmed down it went to 0% and today it stands at 2%...

These things move up and down just as well but nevertheless form one of the relevant signals in determining the metal's price sustainability in my view.
 
Quote from peilthetraveler:

There are over 150,000 open interest silver contracts as of close. Comex only has enough physical silver to satisfy less than 8700 contracts or about 5.8% of all contracts. Comex could go belly up.
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I confess that I have not researched exactly how the silver futures contract is spec'ed, but isn't the exchanges role here just to match buyers and sellers. In the futures markets, isn't it the seller who is responsibility for delivering the physical to the buyer?

I assume the silver futures contract spells out where and when the seller is to deliver a specific quantity and quality of the physical.

I guess one way the Comex could go belly up is if the contract seller, at the deliver date, can't deliver. Then I guess the responsibility falls to that seller's clearing firm. And if the clearing firm can't deliver, then perhaps the responsibility falls to the exchange to deliver the physical.

cT
 
Quote from peilthetraveler:

There are over 150,000 open interest silver contracts as of close. Comex only has enough physical silver to satisfy less than 8700 contracts or about 5.8% of all contracts.
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Comex can immediately satisfy about 20,000 contracts to my estimates. This is plenty for all the physical delivery ever. 95% of the open interest is speculative. They do not intend to take delivery. As a matter of fact, they cannot afford to take delivery. All they have put down is margin to speculate.
 
Quote from charlieThomas:
I guess one way the Comex could go belly up is if the contract seller, at the deliver date, can't deliver. Then I guess the responsibility falls to that seller's clearing firm. And if the clearing firm can't deliver, then perhaps the responsibility falls to the exchange to deliver the physical.
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Therefore, if I'm a clearing firm with a client that has an open position on the last trading day, or an exchange with a clearing firm with an open position obligation on the last trading day, and I have any doubt about their ability to meet their contractual obligation ie shorts deliver and longs take delivery of the physical, then I will "force" them to offset their position by the end of the last trading day. Shorts will be forced to buy and longs to sell thus reducing the open interest and removing the contractual obligation for a physical delivery to occur.

cT
 
It was before my time, but I recall hearing stories from the old timers about a failure in silver. There were two or three failures in futures fairly close to each other as in only a year apart or so. The key lesson I learned was the regulators always made an announcement after every failure had been cleaned up - "We've fixed the system so there will be no more failures." Then BANG! they'd have another one, LOL.

Never trust the suits. ;)

I think it was the Hunts who were the main cause of one of the silver failures. But it's a dim memory, probably not helped by the various adult beverages being consumed during the listening. :D

Point is, this sort of thing has happened before and there are (more or less) established policies to deal with it.
 
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