Skip to comments.Physical Silver Price is Really $50 per Ounce (80% Premium on COMEX Silver Non-Delivery)
Posted on 03/06/2011 6:27:42 PM PST by Errant
...It was reported that Blythe offered 50 percent premium. That was not even close in our case. We got over 80 percent premium. That's right. Over $50 per contract on the condition that our group sell all our contracts...
These sets of facts from our traders lead us to believe that the paper price of silver may have a difficult time surpassing $36 because if the counterparty at the Comex is so willing to pay north of $50 to dissuade people from standing for delivery yet the paper price of silver is still under $35, then we suspect that losses triggered by derivatives is the main reason for the price suppression of silver. We can see no reason why they would not allow the paper price to go up yet are so glad to pay off the comex contracts to show the world that so few are standing for delivery. In our mind, Comex could default with if as little as 4,000 contracts stood for delivery. We are very curious to see how high the paper price of silver actually trades during this run. Posted by Louis Cypher"
It should now be obvious to all that silver is a fractional reserve system. Just like a fractional reserve bank, when there is more demand for the actual underlying good (i.e. silver or money) than there is a real physical supply for, it's called a "run on the bank". Those who get in line first, get their silver. Everyone else will end up as an "unsecured creditor", holding a worthless piece of paper when the music stops.
(Excerpt) Read more at marketoracle.co.uk ...
Is there anyone who would be willing to summarize the above in normal English?
Yes, someone please explain to us peasants.
Owning silver paper...that says you have metal...
..but in the end you have only paper
Trading virtual silver ...... sucker ..... its a derivative scheme, possibly
How I see it:
Paper price = broker has it somewhere for you
Physical Delivery = you hold it in your hands (people don’t trust the system)
That is it!
The Comex racket has contracts for silver purchases that are coming due. There’s not enough physical silver inventory to meet deliveries.
I think that’s it in a nutshell, someone else please elaborate...
It sounds like that if a buyer were to go and buy silver futures, say a hundred 1000 ounce contracts (not sure if the standard contract is that size or not) and then instead of selling the contracts when they come due actually asking for physical delivery of the silver their personal vault somewhere, then COMEX is buying them out way above market price so that they do not have to deliver physical silver.
This makes it seem that COMEX doesn’t really have all the silver they say they do to cover all the contracts they sell, which means they are overselling a commodity in order to keep the price down. Or something.
A person buys a contract from Comex for silver delivery.
The contract numbers are for 5,000 physical ounces of silver.
It is a “futures” contract, and silver contracts mature at Comex every 2 months.
Now the contract must either be exercised, sold, or rolled over to a later future month. This all has to happen on the day the contracts go “off the board” which is typically about a week before the first day of the month the contract matures.
Now, if on or before that day when they go off the board, a contract holder can come up with the total cost of his contract and plunk it down at Comex and demand delivery.
For 5000 ounces at around 30 an ounce, that amounts to about 150K
If the price of silver is rising rapidly, then it would seem to pay to actually take delivery. You know it and Comex knows it.
So they might try to talk you out of it in a way. They want you to roll over your contract to a later month, and will give you some goodies to do it.
Or they might just as well buy your contract outright, that way you are happy, and they don’t have to give you the physical metal.
That is what we are talking about here. People hold contracts, possibly at a much lower price than spot currently is, and Comex decided to pay them 80% over the spot price to satisfy the contract.
Alot of folks who watch things are expressing much doubt about this report.
I’m kinda on the fence...
Correct. Good, succinct summary. They are settling in cash at high premiums to prevent people from taking delivery of physical silver.
I like to know how they get the money to pay such premium. If they keep doing that, won’t they go bankrupt? So why keep selling futures that they can’t deliver? I find it unbelievable
I’ll give it a shot.
There is a lot of contracts in silver out there—more than can be satisfied if they are all redeemed at once.
Companies selling the futures contract are being exposed for not having enough physical silver on hand to meet redemption requirements.
If that is exposed, the whole merry go round stops, and silver will go much much higher.
There are folks out there who have been saying this for awhile.
They tried to prove a point by accumulating 5,000 contracts and requesting redemption in physical silver.
To avoid being exposed COMEX offered to pay them 80% above the price of silver on Friday Feb. 25th in exchange for their contracts.
Why do that? Why not just deliver the silver?
Because evidently, there was not enough silver on hand to meet the withdrawal request.
Silver contracts are traded like oil contracts. Doesn’t always mean there is enough silver on deposit to meet the value of all the contracts in circulation.
If there is not enough silver, the price must go up. The price is kept artificially low by the appearance that there is enough physical silver to meet the total amount in the contracts.
The theory is, there is not. And if that is exposed, the price of silver will soar to its real value, whatever that is.
To avoid that, these guys were offered 80% above spot to go away and redeem their contracts with no delivery of silver.
Appearances stay normal and everybody is happy.
Until someone else threatens the same thing.
In a nutshell and the OP @ “before it’s news” claims to have been paid silver spot price PLUS an 80% premium for NOT taking delivery of physical silver. If true, that amounts to $50 for the total contract amount.
Here’s the “Story.” A group of ex-employees of JPM, who HATE JPM and especially HATE Blythe Masters, head of the JPM commodity trading desk (who fired them) are aware of JPM’s large short position in silver and its inability to deliver real silver against those short sales. So this group, the spokesperson for which is “Wynter Benton” has decided to buy silver (i.e. go “long”) on the COMEX, meaning, they bought futures contracts. Specifically, March ‘11 futures contracts. Then, they “stood for delivery” meaning, when those contracts expired, they paid in full for them and stated their intention to receive silver for them, which is incidentally in the amount of 5,000 ounces per contract. But they have reason to believe that the COMEX doesn’t have enough actual silver to deliver on all the longs, so they expected - and received - a cash premium to settle in cash rather than take delivery. In other words, they are willing to be bought off in cash, rather than get 5,000 ounces of silver per contract. However, they weren’t willing to accept a “mere” 30% premium, they even refused 50%, and claim the premium they accepted was 80%, which means about $60/oz, which is incidentally some $120,000 in cash higher than the value of each contract, over and above their appreciating between when then got them in early Feb and expiry at the end of Feb. So the story goes. Wynter Benton posted on Yahoo in the JPM message boards.
Correct. Good, succinct summary. They are settling in cash at high premiums to prevent people from taking delivery of physical silver.>>>>>>>>>
If true. I have not seen solid proof yet. I think this is true but need some documentation.
“Yes, someone please explain to us peasants.”
I’m no expert, but I’ll try to explain as far as I understand: the fact that the price listed is in the 30 dollar range and that the price for silver that would actually be in hand (to have and to hold, as it were) is in the 50 dollar range means that there’s something a little shady going on. What that is, according to the article, is basically selling the one thing, silver, twice or more, and hoping that delivery isn’t asked for by everyone all at once.
In other words, if you want to be safe holding silver as an investment (and by extension, gold or any other deliverable commodity), make sure you actually have it in your hand or possession. Especially as the value of commodities go up, and our dollar because of printing five times more of them goes down, incentive for commodities dealers is to trade like this, but for you as the investor the incentive is to not completely trust them.
How was that?
Make that $50 an ounce for the total contract amount. ;)
The Fed has been backstopping the precious metals price suppression scheme for nearly 30 years in order to make the dollar look stronger and keep it as the world’s reserve currency. No one is going to go bankrupt if the central bank is backing you up.
I will take a stab at it.
The COMEX is where people can buy silver or other commodities. Usually, the players there don’t want the actual commodity, they are just making bets. Well, silver has become very tight. And the COMEX doesn’t have enough for all of those who do want physical this month. So, what COMEX has been doing, is offering to pay more money to make the physical buyer, say OK, pay me more money, I really didn’t want the physical.
It sounds like they were trying to pay 50% MORE MONEY than the contracts were worth, to make people who had contracts be satisfied. Now, this post is saying that they got 80% over the current price of silver. Silver is around $35, $36 tonight. So, 80% of that is over $50 an oz for silver. I am not sure what base price they are using.
It is very significant. It means that the COMEX is near breaking. There are rumors that there are massive shorts on silver by JPMorgue. The price could easily go parabolic.
Hope this helps. Any one who knows more, please, post away!
That's correct IF the story is true. Lots of secrecy and misinformation concerning the precious metals markets these days from ALL sides.
The take-home message here is:
GOT PHYSICAL SILVER?
If you don’t, you ain’t got nuthin but worthless paper.
If all this COMEX hubub is true then how do you explain silver bar availability at APMEX? Some bars are out of stock but there are still bars available at spot silver price ($36.30) plus $1.29 (approximate)
From the "shorts", those who have sold the contracts. It's rumored that JPMorgan is the largest seller of silver contracts. It's also rumored that they are working in conjunction with the central banks flush with newly printed cash.
Even if that is true, why keep doing it. Thats like buying silver at $80 and selling it at $35 continuously. You know you will keep losing, so why keep doing it. Its better to simply default and pay less
Thanks for your analysis. Doesn’t sound good.
Some people invest in silver and think they are a contract for delivery (if they request it) of physical silver (silver bullion).
What many are actually trading are silver futures, which are contracts not for physical silver but paper “deeds” to silver, but the physical silver does not actually exist.
Something to bear in mind is that some investment portfolios are invested in gold and silver and the people who are investing in these also think that if the equities markets, the mutual funds, the bond and treasuries markets and the dollar itself plummet and crash that they at least have the gold and silver in their investment portfolio.
This is a fallacy. They do not. They have been trading the same as what this article is talking about, ETF’s, which is really just trading on the future price of a commodity (in this case silver). As such, it is merely speculation on the near trend for people who want to buy and sell and get out with a quick profit (in dollars).
Silver is really going up in cost. Whether it will drop back down and, if so, when, remains to be seen.
But you can bet it will be very difficult for it to drop back down under $20 an ounce, because so many people are in tune with what is happening with these communists running our country and the banking system and how pathetic is the fiat currency they are using.
When/if the cost of silver begins to drop for other reasons, the strong demand will keep the cost high.
Silver is a decent investment, not, as most people falsely assume, because if you buy a thousand dollars with today in a couple of years you’ll be able to sell it for $2000, but because it, like gold, retains its purchasing value.
If today $1000 can buy $1000 loaves of bread and if the government prints itself into an inflationary spike, that $1000 may only buy 500 loaves of bread in a few years. However, if you took that $1000 and bought $1000 worth of gold or silver and held on to it, in a few years when that $1000 of fiat currency is only worth $500 in purchasing power (500 loaves of bread) you’ll be able to sell that $1000 worth of silver for $2000 dollars and with that $2000 you can buy the same 1000 loaves. This is why it is a good investment, to maintain purchasing power when a fiat currency is losing its value due to inflation.
By the way, I have no position in anything. I’ve been studying monetary science and monetary policy and economics from the Austrian-school perspective. So, take my information with a grain of salt and verify all of it.
See my post #27.
the guys name is LOU CYPHER??? Really???? LUCIFER???
It is the beginning of the “Lie of Fiat Money” being found to be worthless, unfortunately.
We are living in interesting times.
If there’s a short squeeze in silver ... and it looks like it’s happening presently ... JPM could face billions of dollars in losses on its silver shorts. And if JPM folds, it being the counterparty to trillions of other derivatives, could make the worldwide financial system “interesting.” Ruh roh indeed.
If you buy a contract for silver, you can get silver or cash when you sell the contract. Today silver spot price is 35 bucks per ounce, but the COMEX is willing to pay people 50 plus bucks per ounce if they are willing to settle for cash in lieu of the physical silver metal. In theory every contract sold by the COMEX should be backed by silver, but there is 100 ounces on paper contracts sold to and held by investors for every ounce of physical silver in the COMEX vaults. What happens when more people want the physical metal in lieu of the declining value of US dollars??? That is starting to happen as more people are concern with the devaluing US dollar. COMEX may not have enough silver on hand to meet its customer demands.
The current spot price of silver is based on numbers 100 times the actual physical supply available. Imagine what the price of silver would be when the public finally understands that the actual number of silver available is 1/100 the numbers quoted by the COMEX and banks.
If that’s the case, which I suspect it is, there is also the element of fraud involved.
This happened with JPM about two years ago when they got caught naked-shorting gold sales. They thought they were just selling contracts to a customer in Europe but the customer, rather than just wanting the paper to turn around and resell, demanded delivery. JPM never had it because they were running a naked-short and they were caught and should have been brought up on charges. Of course, they and their commie cousins in the White House figured a way out of the jam without having to do jail time.
It's not a day to hope for. Once gold and silver go to price levels that are not tampered with by central banks, their values will rise to levels unthinkable today. And that is the day the drumbeat will begin for confiscation.
They are being paid as if the silver is worth $80, but they are being paid in dollars, not silver.
They are being paid extra NOT to take the real silver.
Does this help?
Lucifer is the name of the person Wynter is in contact with. Oh, sorry, Louis Cypher. But Louis is not one of the traders.
Shouldn’t this be fairly simple to verify by looking at the books? How can COMEX be hiding how many contracts they are buying/selling and at what premium? I don’t doubt that the do have a mechanism to hide it, but I’d think this one would be fairly simple to discover.
As if silver is worth $60 - 80% premium over 35.50. Not $80.
The Wicked Witch Explains Her Motives..... This video explains why JPM shorts silver
The “wicked witch” is Blyth Masters who heads commodities at JPM... she also was one of the inventors of credit default swaps
Because if this is true, it is a form of Ponzi scheme. And Ponzi schemers have to keep playing until the entire scheme falls apart. They keep thinking they’ll figure a way out.
The only way out at this point is if the price of silver crashes back down to $15 an ounce or so and stays there for a few months until most of these contracts end.
APMEX volume is insignificant compared to COMEX. APMEX is also buying from and selling to individuals who are behing the world market. Finally, I've notice that APMEX doesn't seem to have the amount of silver eagles on hand as before. Under "availabilty", they simply say "now".
... in other words: Got silver?
Exit82, well done, thank you.
I pay close attention to the physical market, and while silver is certainly still freely available, I’ve been hearing a lot of chatter about it drying up here and there.
While I’ve no proof, I’ve no doubt that COMEX has run dry and is on the brink of defaulting on silver delivery. All it would take is a group like the JPMs INSISTING on physical delivery, and then blowing the whistle loudly when COMEX defaulted, starting a “run” on COMEX in other markets.
I would find that rather amusing.
If true, we have a classic short squeeze in progress. $200 silver is an easy target.
But I doubt we will get confirmation. Comex has lawyers just like everybody else. And have NO DOUBT that if this is true, they have an NDA (non disclosure agreement) written into the final contract.
But it’s kind of like Comex is already eaten alive. The big players, the hedge fund managers, etc. KNOW that Comex is having trouble delivering. They KNOW how much stock Comex says they have in the vaults. They KNOW if they take out contracts more than what Comex can handle, Comex will pay a premium... 10%, 15%, 25%, it doesn’t really matter because I’d be ecstatic to make 10% every two months.
Next delivery month is May, so we very well could see Comex explode at the end of April.
It’s $36.40 on the Asian markets tonight.
I was responding to post 25, which had the $80 silver.
I didn’t catch that, thanks.
I think I still conveyed the basic concept to them.
The Bears will explain everything:
Go to www.zerohedge.com
for further info.
Only about 10% of the contracts are ever traded for silver. That's it, in a nutshell.
Thanks for the link!
There are only 1600 Comex silver contracts for March 2011 outstanding as of Friday March 4.
I suspect this story is nothing more than a well written story to excite.