Perhaps you are right, and perhaps physical 'spot' shouldn't be based on the futures market. However, arbitrage (with a little carry cost and lease rate factored in too) sure takes care of that! The accepted 'spot' of BHP is, of course, based on the trading of it's shares because the shares represent an underlying ownership of the company. Simple. (see reason #62 here: http://forums.silverstackers.com/topic-50380-77-reasons-you-re-awful-at-managing-money.html) I am just calling it for what it is. And the truth be, it is not what some folk wish it to be.
Well as someone who owns over 1000oz in gold, I can tell you the answer is none of the above. Hopefully, most of you are joking to lol I hope :| But maybe a good hint could be to listen to peter schiff but no one really thinks he is creditable anymore. Guy made me millions of dollars. everything he says is a go for me Note: I'm an investor not an English major.
To put it into perspective... Futures are sold by those who don't really own the metal and is bought by those who don't really want the metal. It's a perfect relationship.
Obviously arbitrage makes sure the physical market follows where the futures goes - but that's the point - the futures market is multiple times bigger and has infinite leverage, so the futures sets the price and the physical follows along - whether the real market wants to or not. I know that's the way it is. But at some point the world might wake up and ask wtf are futures traders doing setting the price of stuff. It was starting during the big run up in oil to $150 - with the price of oil and food rising around the world leading to riots in poor countries. There were many politicians questioning the role of the futures market in that - but then it all died down when the price dropped back down. Might happen If something like a LIBOR scandal breaks out to do with futures
Purely technical, downtrend resistance line in place since November 28, 2012 was broken on February 4, 2014
Take today 1 million silver futures positions (5000 ounces each), expiration over 3 months. Spot price will increase today alike that silver is bought today. Cancel tomorrow these 1 million silver futures positions. Spot price will decrease tomorrow alike that silver was sold tomorrow. That 1 M x 5000 = 5 annual world total supplies were never actually needed. Not today, not tomorrow and even not over 3 months since it's near to never actually delivered. Because they aren't after the silver, they are after dollars. Example: Someone has a 15000 ounces stock. He gets concerned about an eventual price drop, which would drop the value of his stock. So, he decides to take 3 futures market positions of 5000 ounces. IF the price indeed drops, then he will gain dollars on his contract account. That gain will offset the value loss of his stock. IF the price rises instead, then he will lose dollars on his contract account. The gain on his silver stock however, will offset this dollar loss. In other words: he is neutral. Fully hedged. He undoes losses due to price changes, but he also gives away all profits due to price changes. They can now 'play' risk. For ex if he thinks that the chance of a dropping price decreases, he can decide to only take 2 instead of 3 futures market positions of 5000 ounces. So if he's right, and the price indeed doesnt drop, then he keeps the profit on 5000 ounces. Of course, if he's wrong, he also keeps the loss on 5000 ounces. The net total (all longs minus all shorts) position of the futures market, is reflected in the spot price as if the silver was purchased today. So buying people pay more due to a purchases that actually didn't take place yet, and since most dont end in delivery, never. That's why it is generally a bad idea to buy silver when the total net futures position is high. There are exceptions possible though, depending on the silver demand of others on the market (stackers, industrial, jewelry etc). If the net total futures position would be 50 Moz, and others trade 500 Moz, then the futures market drives only 10% of the price movement. Ex for some other commodities, alike crude oil, the net total position generally fluctuates around a small fraction (for ex a week supply) of the other demand (for ex a year supply). That's why my signature (not always updated tho) shows a % of the annual total. For silver, the futures market % is remarkably high. The Comex position fluctuates 50000 positions of 5000 ounces. That's 250 Moz, or 25% of a year supply, or 3 months supply. For gold it's about halve that, and that's why silvers price usually gets driven % wise twice as much (in both directions ofc). In other words, the market share of the money for nothing club, is in silvers case, very high, and that's why it's recommended to think twice before buying at any price haha.
Coincides with fall of Bitcoin...Where else is a Bitcoiner to go? Everyone has their finger over the buy button, just waiting for a break out...if it goes it will go quick...and then JPM will take it down just as fast by selling silver they don't have.
We Redheads think alike. But seriously, there's another post from the Herald suggesting the Aussie Dollar might drop to 60 cents. Though I doubt it, it would mean today's stack has increased in worth by 50% without lifting a finger. The reality will be that an ounce of silver will be the starting point from which you'll measure the value of goods, services and fiats.
Fiat money games make prices dance. PM investments are for dark times when you can't rely on fiat. During any major crisis it's fiat that you can't rely on and PM's that you can rely on. No matter what price oscillations occur in between. This is why I still believe, without being a "permabul". I am a realist. -60 cents drop of the Aussie dollar means -60 % drop of value. It's like when you have 10,000 AUD saved and a while later it's worth 6,000 AUD only.
Because the money for nothing club bought back in. Then hunted for some suckers to pay the bloated price after them. Then sold back out. $19 > $22 > $21 > $20 > ? Rinse and repeat!
