When it comes to contracts...
Right now as I type this the overnight April Nymex Silver Contracts are trading at 10.20...while the spot market is quoting 10.14 in Hong Kong and via the New York Access Market...
The contracts are the rights to purchase 5000 oz of silver...so in effect you would be paying a premium of .06 an ounce or 300 bucks for the lot...
It is for this very reason that broker dealers who often take physical delivery to sell to the retail market charge a premium over the spot at point of sale...and it usually is quite a bit more than just the contract premium...
For instance...right now at Kitco a 1000 oz bar of silver is listed at 10,300 bucks...as you can see its 5 times the contract premium for April Silver...March is a bit less...
If you want to buy silver or gold and pay the cheapest possible price, you would buy a contract and then take delivery of the certificate...and then either leave the stock at Nymex...or make delivery and transportation arrangements and take physical delivery...
Silver contracts are highly leveraged. It requires 1650 bucks to hold a contract...which you get back at the end. In the mean time you control 5000 oz of silver.
For each penny of price change...your account either goes up or down 50 bucks.
If you bought say April Silver at 10.00 and silver went to 12.00 by contract expiration...your account would accrue at 2.00 x 5000 or 10 grand.
That would be a 600% increase in your capital outlay. Of course it can go the other way as well. Contract traders require excess capital in their accounts above the contract maintenance margins to account for fluctuations in price.
If you were fortunate enough to buy April contracts as described above and silver ran to 12.00, and you wanted physical delivery...you would need to come up with 5000 x 12.00 or 60 grand.
Of course your trading account is 10 grand richer, so you would need to come up with the balance or 50 grand.
The net effect is that you took a risk, but bought 12 buck silver for 10 bucks...
It is the risk premium that the retail broker dealers are charging for when you as a retail consumer pay more than spot for physical.
That may explain why what you see in a gold chart doesn't jive with what you may have paid for your Silver Maple Leafs..
I hope that made sense...
