I must confess, I have no idea what this means nor how it works. Simple me asks who would sign a contract for less than spot? Back to the Holiday Inn Express for me.
In Q4, virtually 100% of silver refining in North America shut down. Gold was the primary driver- let me explain. Most refinery credit lines are in dollars not ounces. As gold prices skyrocket, refineries can afford to finance fewer ounces. Additionally, the human melters are the same individuals who melt the gold and silver at the refineries. Their labor is being used to melt the gold, not the silver, to maximize cash flow. Further, gold can be refined in 48 hours. Silver is a different refining process that takes weeks. For these reasons, refineries focus(ed) on the extreme volume of gold ounces, coming out of the woodwork, at extreme prices, to maximize cash flow limits. Silver went unrefined, exasperating the shortage.
I remember back before this year, when precious metals investors were derided as gold/silver 'bugs' conspiracy theorists, doomsday preppers, etc. - weirdos who were burying coins in their back yards, waiting for the apocalypse. After all, precious metals were just shiny rocks with no intrinsic value, dead money for a decade. What kind of backwards fool would invest in them? Much better to buy some bonds and actually earn a yield!
I worked at the Board of Trade in the early 1970s. Metals deliveries were a pain, involving backing up a truck to a loading dock in the usual way. Streets and alleys offered myriad ways to stage a holdup. I never understood why those vaults were seen as a good idea. Maybe the CME, a few blocks further west, is more secure. But any transport is risky. Perhaps vaults are being replaced by storage and receipting at the site of mining and refining.
Both gold and silver are manufacturing inputs. Storing at the site of refinement until shipment to the manufacturing use destination seems reasonable.
Would either of these factors play into the differing trends at traditional vault storage facilities?
I’m surprised by so much action happening in the minor months. My guess:
The CME futures contracts with the most volatility and edge are usually the quarterlies—thats where most of the trading/speculation happens. Dealers who actually want delivery will focus on Quarterlies because there’s less price movement and less competition for the contracts. Delivery is happening between actual producers and consumers rather than speculators.
Time for new James Bond movie: Silverfinger.
I must confess, I have no idea what this means nor how it works. Simple me asks who would sign a contract for less than spot? Back to the Holiday Inn Express for me.
It's like shorting a stock. You believe you'll be able to deliver for still less.
In Q4, virtually 100% of silver refining in North America shut down. Gold was the primary driver- let me explain. Most refinery credit lines are in dollars not ounces. As gold prices skyrocket, refineries can afford to finance fewer ounces. Additionally, the human melters are the same individuals who melt the gold and silver at the refineries. Their labor is being used to melt the gold, not the silver, to maximize cash flow. Further, gold can be refined in 48 hours. Silver is a different refining process that takes weeks. For these reasons, refineries focus(ed) on the extreme volume of gold ounces, coming out of the woodwork, at extreme prices, to maximize cash flow limits. Silver went unrefined, exasperating the shortage.
Exacerbate *
To be fair, silver shorts ARE exasperated, hahaha.
I remember back before this year, when precious metals investors were derided as gold/silver 'bugs' conspiracy theorists, doomsday preppers, etc. - weirdos who were burying coins in their back yards, waiting for the apocalypse. After all, precious metals were just shiny rocks with no intrinsic value, dead money for a decade. What kind of backwards fool would invest in them? Much better to buy some bonds and actually earn a yield!
The same people that told you trade deficits don't matter.
That read kinda jives with my vibe. Hedge and convert some.
Maybe this time is different. Maybe not
History doesn't repeat but it rhymes. Buy Jan '27 OOTM $30 puts as insurance?
I worked at the Board of Trade in the early 1970s. Metals deliveries were a pain, involving backing up a truck to a loading dock in the usual way. Streets and alleys offered myriad ways to stage a holdup. I never understood why those vaults were seen as a good idea. Maybe the CME, a few blocks further west, is more secure. But any transport is risky. Perhaps vaults are being replaced by storage and receipting at the site of mining and refining.
Both gold and silver are manufacturing inputs. Storing at the site of refinement until shipment to the manufacturing use destination seems reasonable.
Would either of these factors play into the differing trends at traditional vault storage facilities?
I would expect there’s less physical delivery now tuan the 70’s as ownership can be managed contractually rather storing actual bullion.
Anybody else eyeing the wife's jewelry box?
I’m surprised by so much action happening in the minor months. My guess:
The CME futures contracts with the most volatility and edge are usually the quarterlies—thats where most of the trading/speculation happens. Dealers who actually want delivery will focus on Quarterlies because there’s less price movement and less competition for the contracts. Delivery is happening between actual producers and consumers rather than speculators.