Isn't this published somewhere? For ex, after the 201304 price drop, articles appeared that this and that big fund sold Gold ETF shares. http://www.bloomberg.com/news/2013-08-14/paulson-cuts-spdr-gold-stake-53-as-soros-sells-out.html IF there are any big shareholders in the silver ETF's of course. And also to take into consideration that this can change over time. For ex, if Ishares started with a big number of X small fish that bought a combined total of Y shares, and the small fish sold over time, and a small number of X big fish buying the Y shares, then the ETF's amount shares (and silver) doesn't drop, yet a few big fish replaced the small fish.
I think Reuters analyses all the institutional investor submissions to regulators on what they own and then produces a list for each fund showing who owns them. It understates the situation as only certain investors need to report. ETFs/Funds do not have to disclose their shareholders. I'll have a look but last time I checked SLV was around only 20-30% institutional, it is mostly retail investors, unlike GLD which is majority institutional.
It's expectable that fund holders do not have to disclose their shareholders. That's just normal, I also wouldn't want to see "Pirocco 1000 gazillion ounces" on a public list lol. But like you say, certain need to report, and I think that regulators force this along a minimum shares/totalshares ratio. That's also what happens for the Comex futures market COT report. Once you go above a % of the total, you have reporting duties, as to make others aware of the big price impact of your decisions. I also know that certain institutions are exempted from reporting duties. But it's like hard to find out which. For ex, the Federal Reserve references in several documents 'exempted from reporting" but so far I didn't locate such list, on any subject / market. However, this reporting references of course reporting to the government (alike the us SEC) not to some thirdparty / press / Reuters. So that government institution thus also have to publish it before 'we' know it. The COT report is as 'accurate' as '4 or fewer' traders. This gives a clue (that also already suffices here), yet no names. Aboves article says "according to a government filing yesterday". So I would like to find out where that government placed that 'filing'. Did they also place it when Paulson & Co bought the gold shares? I lack older SPDR Gold Trust stock data. Actually, I only started to monitor gold market elements as close as silvers just before 2013 mid aprils high red candlestick on the gold price trend. Just coincidence, I didn't expect it. A coincidence that made me aware of a few remarkabilities around the very day of the red. http://us.ishares.com/product_info/fund/overview/IAU.htm 2012/11/29 11,390,401.627 2013/01/24 10,951,823.486 2013/02/14 10,819,794.343 2013/03/08 9,863,758.707 2013/03/27 9,279,432.999 2013/04/04 9,273,449.210 <- this week I started to check everyday so I'm sure that on 14 april it was still this amount. 2013/04/15 6,653,361.502 <- and hence it was sure that this huge shares dump occurred in the very day of the prices high red candlestick. But I lack this for http://www.spdrgoldshares.com/ because I didn't know it upto then, let alone monitor it. I only started 2013/08/06 29,486,937.62 being 4 months later. What I did notice, based upon the available time overlap in the figures, that the average amount ounces per time unit sold due to shareholders dumping their shares, of both these two ETF's IShares and SPDR, was nearly identical. So close that one may wonder how the degree of coincidence. I calculated this selling ratio to find out the future date at which these 2 ETF's would end up with a gold stock of 0 (so basically cease to exist as a fund). I talked this begin january this year, in post #33 of http://forums.silverstackers.com/topic-47683-my-outlandish-probably-wrong-prediction-page-2.html The measured period thus was begin august till end december 2013, being the period of having both SPDR and Ishares data, about 4 months, so not exactly a statistical nothing. The result was: Isn't that remarkably close? 27 days difference on a average of 945 days. That's a time difference of only 2.85%. That's a serious coincidence. And maybe it isn't. Is it possible that same funds, or a group of cooperating funds, have shares in both Ishares and SPDR, and that they sold the shares simultaneously from both ETF's? See, big guys tend to have same plans, same goals and same strategies. Maybe they coordinate abit too when performing the big gold sales behind the high red candlesticks. But as said, silvers ETFs house in the precious metals scenery didn't release much info. I find it quite weird that silver ETF shares weren't dumped with golds, yet silvers price dropped with golds. Mint/bar sales also didn't drop. Coins & Bars Moz 2004 -53.0 2005 -51.5 2006 -48.7 2007 -51.2 2008 -187.7 2009 -87.9 2010 -146.1 2011 -212.6 2012 -139.3 2013 -245.6 2013 was even a record year of coin/bar purchases. ETF Inventory Build 2004 0.0 2005 0.0 2006 157.8 2007 54.8 2008 101.3 2009 153.8 2010 132.6 2011 -24.0 2012 55.1 2013 1.6 2013, not negative, so they weren't the sellers. They sold in 2011 abit, when price was a peak. Exchange Inventory Build (Comex etc) 2004 -20.3 2005 15.9 2006 -9.0 2007 21.5 2008 -7.1 2009 -15.3 2010 -7.4 2011 12.2 2012 62.2 2013 8.8 2013 not negative, so exchange stocks weren't sold. Physical Surplus/Deficit (equals Total Supply - Physical Demand) 2004 -45.1 2005 8.2 2006 -17.5 2007 -65.0 2008 -171.0 2009 52.2 2010 38.1 2011 -31.3 2012 51.0 2013 -103.0 2013, big silver price drop, yet 103 Moz, 10% of worlds annual total demand/supply, as deficit instead of surplus. The entire supply/demand, shows not any reflection of sales that can cause this price drop. What remains? The unmonitored? But how does the price mechanism then get aware of it? Who sold big amounts to who? How comes that new sales didn't drop if so much old existing is thrown for sale? And this is all why I ask questions like this topics one. I've no clue, all I do is wildly poking around, in the hope to catch a paper that was blown around by the wind, with the answer on it.
You are only looking at part of the picture so it is easy for price to change even though ETF holdings haven't, as ETFs target different type of investor to say physical coin holder. There are a lot of metal that trades and is not reported, eg people buying coins/bars over the counter from a coin dealer, particularly if that metal comes from secondary market or private mints which are not part of GFMS reporting. Then you have big private investors who trade through private banking arms of bullion banks, none of that is reported.
Again: if trades aren't reported, then how can they affect the price? A price changes due to a difference between demand and supply, right?. Demand has to equal supply because a trade requires a buyer and a seller, right? Ahe price is changed by the people and/or programs whose job it is to change it, until the amount ounces for sale matches the amount ounces demanded, right? If there is demand/supply that isn't reported, then how does Joe the price changer (program or human) know, let alone act upon it? The 'part of the picture' I look at, is the reported part. What else? I just don't know the rest, and neither does Joe. The 2013 reported demand/supply figures do not show reason for the 2013 price drop. What does this mean? That Joe the price changer, apparently receives more data than Thomson Reuters that delivers the SI figures. Alternatively, that Thomson Reuters deliberately ignores certain data. What other explanations are there? Second, what causes a price to be changed by Joe? A NET difference. Then, if Rob the stacker buys 1000 ounces from Lance the former stacker, 'over the counter', 'secondary market', then this does not change the price. Even IF Joe the price changer had seen it. Why? Because there is no NET difference. 1000 ounces were bought, 1000 were sold, buyer found at the price, seller found at the price. All it is, begin to end, is a transfer of ownership. Imagine that there are 300,000 tonnes silver in the world, owned by 3 million people. Imagine that they tomorrow sell it all to 3 million other people. Imagine Joe sees it ALL. Nothing under table / over the counter. Should Joe change the price? No. And why? Because it's already all agreed. Joe didn't need to change the price to convince more buyers or sellers. This all ofcourse expressed in ounces, not people. Now think 1 step further. What does this mean for this discussion? Well, that the way that the trade happens, 'over the counter / unmonitored', already IMPLIES a price agreement between buyers/sellers. Then tell me, how can the unmonitored part of the silver market, cause any price change at all? It already can't even if it was spied upon by the price setters. Because buyer and seller agreed with the price. They didn't need Joe for it. Do you see a thinking error in above? I just try to do my best and if that doesn't give me answers then I can only try and ask. Above would narrow it down to: Which is exactly what I'm after. Though I don't know why you here narrowed this down to 'private'. Not that it matters for the price mechanism whether private or public, but if anybody is exempted by the government from reporting duties, wouldn't it rather be governments own institutionals? Or any under the government umbrella of privileges and/or sponsoring? That's why I searched for such lists of exempted from reporting duties. The price drop of 2013, and the lack of public figures that show reason(s), means that the answer sits elsewhere. That's what I'm after.
Transactions done with a bullion bank may not be reported, but as those bullion banks provide price feeds to Reuter and Bloomberg on what they will currently buy and sell at, and those prices are influenced by the transactions their clients do, that is how the unreported transaction affect the price. I do not know why you think that the private transactions between people and companies must be reported or need "exemption". The only data that is reported is stuff traded on public exchanges, because it is public. Some precious metals are traded on exchanges but there is no requirement that all precious metal transactions must be done on exchanges, and nor should there be if we all want to maintain our privacy. Precious metals have always been an OTC market http://goldchat.blogspot.com.au/2008/07/gold-value-chain-part-iv-trading-prices.html and just because you cannot see all of it doesn't mean price impacts are not occurring.
What's the difference between "reported" and "price feeds to Reuters and Bloomberg"? Remember, you said this in your previous post "Then you have big private investors who trade through private banking arms of bullion banks, none of that is reported" And I answered that that was exactly what I'm after. I also said that it doesn't matter for the price mechanism whether private or state. If I put both your answers together, then what I'm after is those "price feeds to Reuters and Bloomberg" But Reuters and Bloomberg are news agencies, and that IS reporting. Thomson Reuters IS a division of Reuters. Where do you think I find my data? Ex. all the Silver Institute figures I use, ARE from Thomson Reuters. So what you say here, or try to say, is quite contradicting, or at least, very confusing. I didn't say that private transactions must be reported. I also didn't say that private transactions need to be exempted. What I did say, and asked, was how the price mechanism would know it, and take it into account (read: change the price), without being reported. What I also said, was that a private transaction already implies an agreement over the price, the price mechanism doesn't need to change the price, since they already agreed over the price. And also that this doesn't affect supply/demand ratio (and thus the price) in any way, because all what a private trade is, is a mere ownership transfer that has no net effect to the outside. If you want to sell me 1000 ounces based on the current spot, and I agree to buy them, then there is no need to change spot. That's why I think it. I asked for eventual fails in this thinking process, but above appears pretty obvious, no data input = no data processing. If I had been Joe the price adjuster, and some do not report their ounces traded and agreed price, how can I adjust it accordingly? and nobody reports to me, what can I do all day? World Gold Councils figures (maybe ALSO derived from Thomson Reuters) DO reflect demand/supply changes that explain 2013's gold price drop. Silver Institute figures (derived from Thomson Reuters) DO NOT reflect demand/supply changes that explain 2013's silver price drop. Both price drops indicate that both gold and silver reports reached Joe the price adjustor. It was clearly no problem to pass them to Joe. But, in golds case, the rest of the world got informed too. While in silvers case, apparently not. And I'm hunting for an explanation. This was Pirocco from the SS Questions department. If there is any1 awake from the SS Answers department, please ring the bell!
Hello, I am Minnie, Pirocco's data processor. Sorry if I disturbed something. :| I was asked (well um commanded :/ ) to transfer some data here. GOLD 2012 > 2013 = <change tonnes> <price pressure direction resulting from category and +/- of change> Mine production 2864.1 > 3018.6 = +154.5 DOWN Producer Hedging -39.7 > -50.1 = -10.4 UP Recycling 1590.8 > 1371.4 = -219.4 UP Net Government Sales -544.1 > -409.3 = -134.8 DOWN Jewelry 1896.1 > 2360.9 = +464.8 UP Electronics 284.5 > 279.5 = -5 DOWN Other Industries 92.4 > 93.2 = +0.8 UP Dentistry 38.6 > 36.4 = -2.2 DOWN Coins & Bars 1347.3 > 1766.1 = +418.8 UP ETFs and similar products 279.1 > -880 = -1159.1 DOWN Total net change UP - DOWN = -341.4 Average price $USD 1668.98 > 1411.23 = -257.75 or -15.44% SILVER 2012 > 2013 = <change Moz> <price pressure direction resulting from category and +/- of change> Mine production 792.3 > 819.6 = +27.3 DOWN Net Hedging Supply -47.0 > -41.3 = +5.7 DOWN Recycling 252.6 > 191.8 = -60.8 UP Net Government Sales 7.4 > 7.9 = +0.5 DOWN Jewelry 181.4 > 198.8 = +17.4 UP Industrial Fabrication 589.1 > 586.6 = -2.5 DOWN Coins & Bars 139.3 > 245.6 = +106.3 UP ETF+Exchange Inventory Build 117.3 > 10.4 = -106.9 DOWN Total net change UP - DOWN = 41.6 Average price $USD 31.1497 > 23.7928 = -7.3569 or -23.62% I take responsibility for processing this data. I do not take responsibility for transferring it here. I was commanded, remember? Regards, Minnie
I should have been more clear, when I said that the banks provide their bid and offer prices to Reuters, that is all they provide. They do not provide the volume they trade nor the actual exact prices they traded at. So Reuters does not have some magic data source on bullion bank trading. In my blog post I explain that the Reuters prices are quotes they are not firm offers that you are committed to like if you put an order on a public exchange. Having said that at the Perth Mint we find that the quotes are reflective of prices you will get when dealing. So the Reuters price reflects the majority of trading that occurs and is what you are looking at trying to match to supply/demand numbers but the volumes of bullion bank trading are not reported or included in GFMS/WGC supply demand numbers so you are not getting the full picture and that is why you can't see a match between reported volumes and price behaviour.
My question was how those (including programs) that adjust the marketwides spot price, are made aware of the required data to do so. You first said that this happened along news agencies. You then said that these are only given quotes (which I interprete as bids not finally agreed prices). So there would a world price mechanism, that would rely on news agencies, that in turn would rely on bids, of a handful big bullion banks. Even voluntarely bids, because your news agencies ofcourse can't force them to report? I talk about the world price mechanism, being the spot price, for silver, as shown on all the price charts including the ones here. It all has to arrive at the spot price mechanism, being the mechanism that is based on contracts on the futures market. It's the amount contracts that are the introducers of the amounts ounces of the trades to the worlds price mechanism. Not your volume/price feeds to news agencies. Those are only an earlier part of the story that finalizes at the futures market and its spot price mechanism. Bullion banks probably just directly take futures positions according to what they agreed. Data passing directly to futures market. No news agencies involved. Because they are banks, resellers, just like fiatbanks lend out depositors and shareholders-stock market money, and are managing stock, and if their trades change that stock, they have to change their hedge too, in a degree that depends on their desire to speculate themselves (winky eye here, if you get what I mean). Now back to my question: how is it possible that supply/demand figures can contradict with price changes? In the end, shouldn't the net total of those 5000 ounces from the futures contracts, as measured over an entire year, represent at least a directional link to the amount product that is hedged? Hedging is not an all-or-nothing story, and bullion banks, or any stock owner, can decide to only hedge a part of their stocks, depending on the risk they see in the current price. Any such difference being a move away from hedging towards speculating (at least without being passed info that others dont get passed, and thus kills the risk element ) So: Why no contradiction for gold? Why contradiction for silver? (btw thank you Minnie, cookie coming in! Catch! ) Or a more to-the-point question: why a contradiction at all? Golds supply/demand shows a change that is directional and proportional, 341.4 / 4415.2 = a 7.7324% change of the total demand/supply of 2012) so half the 15.4436% price drop. Not 1:1 of course, but stil big enough to clearly support it. Silvers supply/demand, totally contradicts it. It's price dropped more than golds (-23.62% versus -15.44%) yet the net supply/demand change is even in the OTHER direction, 41.6 Moz, which is 41.6 / 1005.3 = a 4.138% change of the total of 2012. 4.138% is 17.519% of 23.62% so much less than golds 50% yet it's in the OTHER direction so the higher it would be, the even more contradicting it would become. And I'm hunting the explanation behind it. Addendum: A very remarkable coincidence there (and the reason why I recalculated it with 4 digits after the comma): The 2012>2013 gold supply/demand difference is 50.0686% of the 2012>2013 price difference. Almost precisely 50%. This is now the third big mathematical coincidence I came across in the gold and silver markets. 1) Thomson Reuters (Silver Institute publishing) supply/demand exact match of a two categories total over 9 years: Coins & Medals 2004-2012 totaled to 616.4 Moz Implied Net Investment 2004-2012 totaled to 616.41429 Moz. http://forums.silverstackers.com/message-648603.html#p648603 2) Ishares Gold and SPDR Gold both having had ounces-selling-rates that despite their different gold stocks (6 Moz versus 30 Moz) were balanced in such a way that both projected runout of stock differed only 27 on 945 days (a mere 2.85% difference in time). See earlier this thread: http://forums.silverstackers.com/message-705147.html#p705147 3) The 2012>2013 gold supply/demand difference is 50.0686% of the 2012>2013 price difference. I wonder how many I will encounter further!
Maybe I should calculate and incorporate the average futures market position for the year 2012 and 2013. In the end, the spot price contains a forward price share that origins from the net amount futures positions (in terms of supply/demand: x 100 (gold) and x 5000 (silver) ounces. I think I have both years completely calculated (ofcourse just a week resolution still this may not introduce an error big enough to change conclusions) so it would be a matter of filtering out the total nets then calculating the average. I can probably reuse here some scripts I already wrote. By the way: does someone have an idea on whether or not options on futures contracts have a direct (arbitration based on deadeasy instant profit to be grabbed) impact on the spot price? An option isn't a future contract itself, just as the name says, an option on it, but it may be possible that some arbitration element is by design present here too, in which case I should take Futures & Options Combined instead of Futures Only. As far as I saw (didn't check much as of yet) options were a small number compared to futures themselves, and graphically estimated, finviz.com appears like showing Futures only. But I'm not sure, and it would directly mean heaps of work, since I only started logging options recently.
Minnie (thank you very much!) finished assembling and processing the futures market year average net positions for years 2012 and 2013, for gold and silver. In order to see the impact of the futures market position on the silverinstitute / wgc figures - based 2012>2013 change better, both the change without, and with the futures market position, are given. ========================= GOLD 2012 > 2013 = <change tonnes> <price pressure direction resulting from category and +/- of change> Mine production 2864.1 > 3018.6 = +154.5 DOWN Producer Hedging -39.7 > -50.1 = -10.4 UP Recycling 1590.8 > 1371.4 = -219.4 UP Net Government Sales -544.1 > -409.3 = -134.8 DOWN Jewelry 1896.1 > 2360.9 = +464.8 UP Electronics 284.5 > 279.5 = -5 DOWN Other Industries 92.4 > 93.2 = +0.8 UP Dentistry 38.6 > 36.4 = -2.2 DOWN Coins & Bars 1347.3 > 1766.1 = +418.8 UP ETFs and similar products 279.1 > -880 = -1159.1 DOWN Total net change UP - DOWN = -341.4 (EXCLUDING average futures position) Average futures market total net position: 191,243.603774 > 88,028.384615 (x 100 = ounces) 19,124,360.3774 > 8,802,839.4615 (x 31.1035 / 1,000,000 = tonnes) 594.8345 > 273.7991 > -321.0354 DOWN Total net change UP - DOWN = -662.4354 (INCLUDING average futures position) Total supply/demand 2012: 4415.2 Average price $USD 1668.98 > 1411.23 = -257.75 or -15.44% ========================= ========================= SILVER 2012 > 2013 = <change Moz> <price pressure direction resulting from category and +/- of change> Mine production 792.3 > 819.6 = +27.3 DOWN Net Hedging Supply -47.0 > -41.3 = +5.7 DOWN Recycling 252.6 > 191.8 = -60.8 UP Net Government Sales 7.4 > 7.9 = +0.5 DOWN Jewelry 181.4 > 198.8 = +17.4 UP Industrial Fabrication 589.1 > 586.6 = -2.5 DOWN Coins & Bars 139.3 > 245.6 = +106.3 UP ETF+Exchange Inventory Build 117.3 > 10.4 = -106.9 DOWN Total net change UP - DOWN = 41.6 (EXCLUDING average futures position) Average futures market total net position: 34031 > 21513.096154 (x 5000 = ounces) 170,155,000 > 107,565,480.77 = -62.5895 DOWN Total net change UP - DOWN = -20.9895 (INCLUDING average futures position) Total supply/demand 2012: 1005.3 Average price $USD 31.1497 > 23.7928 = -7.3569 or -23.62% ========================= Let's now repeat the calculations of post #10. But we now use the new 2013>2014 supply/demand net change, the one INCLUDING the years average total net futures market position. 1) GOLD (tonnes) -662.4354 / 4415.2 = a -15.0035% change of the total demand/supply of 2012. The 2012>2013 price drop was -15.4436% Noticed what just happened here? We included the average gold futures market position change between 2012 and 2013. And the previous -7.7324% change jumped to -15.0035% We just explained that missing 50% part. It was simply 2012's and 2013's futures/forward price share within the spot/cash price that I had forgotten. The original error of near-exactly 50% dropped to a mere 2.85%, which is very acceptable, because the CFTC's COT reports only come in once a week so a low averaging resolution, and also all that rounding, original and in the subsequent calculations. What does this mean: that we see here PROOF that the combination of the World Gold Councils supply/demand data and the Comex futures market data, together formed the input for golds price mechanism. 2) SILVER (Moz) -20.9895 / 1005.3 = a -2.088% change of the total demand/supply of 2012 The 2012>2013 price drop was -23.7928% So the inclusion of the average silver futures market position change between 2012 and 2013 brought the supply/demand change from +4.138% in the other direction, to -2.088% in the right direction. But that's still FAR from the -23.7928% of the price drop. So what is the new situation: - The gold price drop of 2013 is now near perfectly explained (supply/demand -15.0035%, price -15.4436%) - The silver price drop of 2013 stays a mystery (supply/demand -2.088%, price -23.7928%) EDIT - Sources: https://www.silverinstitute.org/site/supply-demand/ http://www.gdpinflation.com/2013/03/gold-demand-and-supply-from-2000-to.html www.gold.org (anyone knows a single page there showing all the data together for X years like Silver Institute?) http://www.cftc.gov/MarketReports/CommitmentsofTraders/HistoricalViewable/index.htm http://www.kitco.com/charts/historicalgold.html http://www.kitco.com/charts/historicalsilver.html
Maybe it's time for some further thinking. To come to a better understanding of what happens. A futures market exists to allow traders to compensate for losses due to price changes. They do so by taking a to-the-amount-of-the-traded-product corresponding amount futures positions, that together deliver the compensation along a trader account at the futures market. That trader account gets dollars added - that compensate for a lower product price when selling (short position of 5000 ounces) - that compensate for a higher product price when buying (long position of 5000 ounces) That trader account gets dollars removed (so a hedge also wipes out unintended/nonspeculative windfall gains) - that compensate for a higher product price when selling (short position of 5000 ounces) - that compensate for a lower product price when buying (long position of 5000 ounces) When the product price changes, the market runners move dollars between the accounts of these two trader sides. Someone, has to END UP paying these dollars. The futures market, is just an intermediate place in the dollar stream. It's not the futures markets position holders that END UP paying these dollars. Remember, these dollars compensate for other dollars on the underlying product market. So let's draw a situation, that is totally nonspeculative, everybody in it, just wants to hedge. An industrial makes a sale contract, delivery time over 6 months, with a customer of his silver-holding products, at an agreed price. Since the price is already fixed, the industrial needs to be sure of his production cost. To be sure of his production cost, the industrial has to be sure of the price he has to pay for the 50,000 ounces silver that his products require. So, the industrial thus places an order for 50,000 ounces at a bullion bank. The industrial foresees 4 months to produce the silver-holding products, so tells the bullion bank to deliver over 2 months. Now he has to lock in the cost of the 50,000 ounces silver. He contacts a broker, and orders him to take 10 long positions of 5,000 ounces, expiration over 2 months, on the Commodity Exchange futures market. The ComEx market runners receive the order, and now need to find a counterparty for the long positions. They NEED someone willing to take 10 short positions of 5,000 ounces. Who is willing? Remember that bullion bank where the industrial ordered the 50,000 ounces? That bullion bank (or any other dealer) knows that it has to deliver 50,000 ounces over 2 months. Just like the industrial, just like the industrials customer, the bullion bank wants to lock in the price, that it will have to pay miners (or anyone) for the silver, TOO. And also in the case that the 50,000 ounces were already bought from a miner (or anyone) before, so the bullion bank already having the 50,000 in stock, the bullion bank will want to lock in the earlier paid price, as to receive the same when selling. Contrary to the industrial, the price risk of the bullion bank is the downside. If the silver price would drop, the bullion bank would receive less for the 50,000 ounces (and the industrial would make windfall profits) And here the ComEx market runners found the willing counterparty for the long positions of the industrial. And actually, they didn't even need to search for a willing counterparty. Because, the bullion bank already had the incentive to take 10 short positions of 5,000 ounces. Finally, remember that miner (or anyone), that the bullion bank may have needed to purchase the 50,000 ounces silver from? Or already had bought from before, and thus bullion bank already having them in stock? Well, this miner ALSO want to lock in the price it will receive from the bullion bank. So we arrive at the final conclusion: ALL the companies, want to hedge their future purchases and sales against price changes. What is the fundamental reason for this final conclusion: it's the bold of above. All these entities, are NOT speculating on silver. They make their money from the mining, processing and dealing in silver. Or they make their money from producing products containing silver (industrial). Now, if all aboves companies succeed in this hedging against price changes, and production/consumption is roughly the same, then who causes price changes of silver? Well, only one answer: the temporary buyers. The speculators. Those that try to 'make money' from buying at a lower price and selling it at a higher price. Or everything inverted. If aboves non speculating companies do their job well, then that 'make money' can only be a zero-sum (so a shift) WITHIN the speculative side, AND can only fail as a WHOLE. And this, leads to a crucial statement: End to end, aboves dollar stream, can only origin from speculators. And that's why the futures market was invented. The futures market was designed as a means for companies on the market of the underlying product, to battle speculators. How do they do this: by creating an easy profit to be grabbed, when the future/forward price differs from the spot/cash price. This profit is grabbed as soon as it pops up (this is what is called "arbitration"), and moves the spot/cash price towards the future/forward price (i.e. increasing the 'share' the latter has in the former). And that's why the spot price tends to rise with a rising net total futures positions. This is especially true for the gold and silver markets, because unlike weather > harvest, nature caused supply / demand shocks are very scarce. All that remains, is the risk of the speculators. That's why aboves companies increase their hedge with increased buying from speculators. And why they decrease their hedge with decreased buying from speculators. Result is that the spot price is driven up, and down, at twice the rate that the speculators would have caused. Speculators buy 5000 ounces silver, driving up the price to current + X dollars. Above hedgers buy 5000 ounces silver too, driving up the to current + 2X dollars (an extra X). Possibly, and maybe very likely, this is the explanation for golds 2012>2013 supply/demand tonnes change being nearly identical (50% 50%) to the 2012>2013 average futures market total net position change, as expressed in tonnes based on the 100 ounces gold per futures contract. The question now is, why was this not the case for silver? What is the difference? Average price drop 2012>2013 was -23.62% Supply/demand change drop 2012>2013 was -20.9895 Moz DOWN The change 'should' have been 23.62% of 2012's total supply/demand of 1005.3 Moz. Which is -237.45186 Moz. The actual drop thus was 216.46236 Moz too low. This amount corresponds to a futures hedge of 43292.472 positions of 5000 ounces. As the spot price drop proved, Joe the spot price adjustor was informed about this 216.46236 Moz sales. But the supply/demand figures of Thomson Reuters did not reflect it. Yet, somebody should have sold this 216.46236 Moz to another somebody. And, at a lower price. Because, if Joe adjusts the price down, then it implies that these somebodies agreed only at the lower price. And apparently, those somebodies had no reporting duties yet direct contact with Joe the price adjustor. Exempted! So, if in some past data I stumble upon a similar (but opposite) unexplained around +216 Moz figure, then it will be Bingo! See, one has to buy it first, before selling it. And this number can also be scattered over more years. So I would need to repeat what I did, for 2011>2012 and so on. I already have the data, except for the futures position. It's the most work, because so far I was unable to find a direct table of total net position. Despite the CFTC website suggests on several places an availability. And finviz.com also uses this particular figure to weekly update their chart. So maybe I need to search harder, or just contact and ask them. The deviations / amounts over the years could give some insight in which (kind of) entities may possess this 'exempted from reporting duties' privilege. Usually exemptions go to large systemics / institutionals, as to give them an advantage in trading. They can see what we do. http://www.sec.gov/marketstructure/midas.html We cannot see what they do. Yay. The same reason dark pools were, well um, "invented". More accurate: the very reason for the exemptions in the first place. This was Pirocco from the SS Theory Department.
