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.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.