I wonder about the price also. I remember when I was excited to buy under 20 USD. Now I'm hesitating to buy at 16USD.
Q: What 'should' be the current price of silver? Its a very good question. Restated more specifically: At the current spot price, relative to some metric, is silver mispriced (under or over-valued) or priced at fair value. Or more simply, how should we value silver? The answer depends on your choice of valuation strategy and outlook, and a determination of whether the observed market price differs from some pricing model or even personal intuition. I'm sure we could argue endlessly about valuation theories, macroeconomic factors, risk, money supply, opportunistic price distortions, historical norms, the GSR, etc, but it would be interesting to get a comprehensive list of all the theorised and observed contributing factors to the valuation of silver (and gold) that have been put forward without (initially) arguing about the weightings of each.
Whilst I disagree that any futures demand is "bogus", your worthy attempt/calculation only recognises half of the equation. If long positions are "bogus" demand, then the equal number of matching shorts on the other side of each position must equal "bogus" supply. Thus, on the 21/04/2015 the "real" price that day is $16.08 - $2.4 + $2.4 = $16.08.
I didn't insinuate anything, let alone an addressed-to-a-person one. I said "last sucker buying" (or selling), and that is using end-values / extremes to make more clear / obvious / prove a statement in general. How does one define a "real price" of a product? A price is a combined result from an unfixed number of variables, and the only general reference out there could be just the production cost as some average. And does it even matter? People that buy inperishable products like gold and silver as a way to store value, will sell them again, and cause the inverse price trend then. And how does one define "manipulation"? How does one recognize "manipulation"? Some say rigging with the price mechanism (alike editing the output of demand/supply change based price adjustments). Some say claimed to exist but unexisting silver. I don't. I just look at the price trend, and compare it with the trend of beyond-human power production-affecting elements (like nature- / situation-caused). If over a period the latter does not explain the former then some people (quite possibly misleaded) had a wrong idea about the price, and some others, quite possibly the misleaders, took advantage of it. That's not rigging the price mechanism itself but "rigging" of peoples thoughts, quite often along wrong figures / false claims / partly stories. Now, how does one measure a "degree" of such manipulation? Well, since some time I do so by using the futures markets total net position and a thumbrule of 70 Moz per price dollar (I came to this figure by laying position changes and price changes next to eachother, to then take an average, and along another way: the amounts Moz changes and the average price changes over the years in the supply/demand data that is annually reported by SI from Thomson Reuters, some general markets analysis company. Coincidently or not, both ways leaded to a roughly same figure of 70 Moz. This is only an element for the period of the futures market contract end date though, and it only draws a part of the picture, not the whole. In order to judge the latter, one has to compare the current silver stockpile with past stockpiles and past prices and correct for currency production and eventually also other elements that matter in terms of impact. That's why I monitor silver stocks and the supply/demand figures. In my place in the world (West Europe), in recent months I've recently seen some prices return to 5+ years ago levels. Some fruits even touched a same price as it was when the Euro currency was forced-in by the central planners around 2000. Though it could be temporary, since the planeshotdown and the EU > Russia sanctions is the main cause. Yet, other and un/less related products also show a similar price return to old. And the politicians now are doing their best to alter the dropping prices of oil / gas (and also houses since recently) and so on, along taxes, and regulation related costs. If this happens for these products, then why would silver be an exception? I was a sucker (that's just how it is, why sticking another term on it?) willing to pay a tripled price for silver ($30), based on quantitative easing figures and faulty thinking QE money just start to circulate nearly as fast as it was created. It was not, because the central planning also took measures to prevent it, and that I didn't know, and that is what made me that sucker. If I take all in account what I do know today, then I wouldn't be surprised to see $15, more accurately: the current purchasing power of that $15, silver as an average over the next decades. There is little luck involved in zero sum markets. Any winning side implies a losing side, even for just a break even in terms of purchasing power. The only thing one can try is to try to put the bullion banks and their buddies at the losing side, but considering the data availability difference, the chance on success is minimal. I see half of the purchasing power I had, as lost. What can I try: to do better in the future. By not buying the bullion banks and their buddies profit lock on the futures market (that's why I didn't buy in 2015 yat), and by monitoring data (not just silver markets). There are quite some Moz silver out there, that will be sold over the next decades (to cause that $15 purchasing power-flat). Just like post 1980 (though I think in a less degree). I'll give a yell when my next silver coins arrive and which price I paid.
You must have read words that I didn't wrote. All my posts in this matter use a total net position, being a sum of all longs and all shorts, and this total applies to both supply and demand sides, simply because every contract ounce that is sold, requires a contract ounce that is bought. A seller needs a buyer and vice versa. This is the structure of the data in the weekly COT report: http://www.cftc.gov/marketreports/commitmentsoftraders/index.htm http://www.cftc.gov/MarketReports/CommitmentsofTraders/HistoricalViewable/index.htm report links: http://www.cftc.gov/dea/options/other_lof.htm (includes options, so far I ignored this because it looks persistently neglectable compared to the futures figure (see next link) http://www.cftc.gov/dea/futures/other_lf.htm There are 5 trader classes. The first 2 are the so-called 'supply side'. The last 3 are the so-called 'demand side'. In reality, and unlike some suggest, there is no such clear company/fund/name line between supply and demand classes, as the explanations page states: the classification occurs on basis of dominant activity, and also on the time of the report. A certain company or fund that buys silver on a moment T1 can appear under demand side then, to later on when it sells that silver on moment T2 appear under supply side. 21/04/2015 (date of data) 33836 (total net position) $16.08 (lbma price see http://www.kitco.com/LFgif/ag2015D.gif ) SUPPLY (finviz.com "Commercial Hedgers" see http://finviz.com/futures_charts.ashx?t=SI&p=w1 ): Producer/Merchant/Processor/User Long 16531 Short 38836 -> trader class is 16531 - 38836 = -22305 so a net short position of 22305 x 5000 = -111,525 ,000 oz (-112 Moz). SwapDealer Long 34293 Short 45824 -> trader class is 34293 - 45824 = -11531 so a net short position of -57,655,000 oz (-58 Moz) > Total net position of supply classes: -111,525,000 - 57,655,000 = -169,180,000 oz. Conclusion: supply side is 169 Moz short. DEMAND (finviz.com "Large Traders" and "Small Traders"): ManagedMoney Long 42437 Short 32283 -> trader class is +10154 so a net long position of 50,770,000 oz (51 Moz) OtherReportables Long 18411 Short 4240 -> trader class is +14171 so a net long position of 70,855,000 oz (71 Moz) SmallTraders Long 23639 Short 14128 ->trader class is +9511 so a net long position of 47,555,000 oz (48 Moz) > Total net position of demand classes: 50,770,000 + 70,855,000 + 47,555,000 = 169,180,000 oz. Conclusion: demand side is 169 Moz long (being the 33,836 positions as "total net position" above) Your "half equation" point is thus void (and a strawman since I talked about total net position being all longs - all shorts of the futures markets supply and demand), it's about this total net position of 169 Moz, that ofcourse applies to both demand (long) and supply (short) sides, since a buyer implies a seller and vice versa. The distinction you make is moot. What matters for the price mechanism (forward/future component that is arbitrated "into" the cash/spot price) is not the total of both sides, but the total net position as a figure relative to zero. As soon as supply and (implicitly) demand (inverted) sides have a net position that differs from zero, the futures market adds to the cash / spot price, and it's this addition that inflicts the real buyers / sellers of the underlying commodity a higher / lower price, with the extra / missing dollars being the first origin of the dollars that "hedging" delivers; and compensates - locks in the wanted cost. It's also the reason why they invented the futures market in the 1st place: to "sneak in" an extra price increase when customers want to buy (or decrease when customers want to sell back). This way dealers don't have to refuse customers to buy back (higher), something that the latter ofcourse wouldn't be happy about. Or refuse to sell (lower). That's why I use the "guaranteed counterparty" terminology. They're always willing, since their hedge compensates anyway if customers would drive the price to... uncomfortable (read: loss) values. And dealers can keep the spot price this forward/future component higher as long as they want, it's only when customers arrive back to sell instead of buy, that they ofcourse dump the position (and price component) with them. For ex. over the period 2009-2011 the futures markets total position stayed high all the time. It wasn't a problem, with all the ETF and other buying that dominated. From 2011 onwards things changed, and we see decade-low position figures pop up several times, with an average that sits much lower.
Isn't that what I said? How can you have a net pos when all trades are balanced? "so-called" does not mean reality.
For the same reason that a baker can bake 100 breads in a day to sell 90 that day. Or in the case of production for the future: produce 110 to sell 100 leaving 10 for a next day. A seller is supply. A company that has a net short position hedges a future sale order against price drops. It's as reality as selling is supply. http://finviz.com/futures_charts.ashx?t=SI&p=w1 Green trend line always under the zero axis. Always net short. For silver. Dito for gold. Dito for platinum. Dito for palladium. NOT dito for copper. Hence the "so-called 'supply side". Things are like they are, try to live with it?
