Just lock in 700 ox=z silver for my production at low silver. Why not ?
$13 silver might be possible
- Thread starter leon1998
- Start date
Gullintanni
Well-Known Member
So if it goes down say another $2 you will only be out of pocket by $1400 short term????????Pull the trigger.
I am waiting for $13 solely because of when i sold and i need to be at that price to get my expected return otherwise id load as well.
As it stands at the moment due to out shity Dollar i need USD price to be at $12.70 ish to fulfill my original plan.
After it gets to that price and i have bought back in then price will not be an issue for me again.
I have to stick to my original plan though or it was pointless making it in the first place.
Pirocco
Well-Known Member
About futures market total net position record low:
On 28/08/2018, end of day price $14.90, it was 1417, on the fluctuation range (couple thousands to about 107000 at a near $20 occasion early 2016) I've seen since 2008 that's nearly zero - meaning spot price has no futures component.
Since it's now nearly a $1 lower, that means that this price drop was due to real market supply increase and / or demand drop.
On 11/09/2018, the total position was 11477 at an end of day price of $14.12.
This means that the futures market actually prevented the price from being driven below $14. This was also the case on 04/09/2018.
This is thus a cycle trend-break, before, the price dropped with a dropping total net position (they decrease their amount hedged)
It isn't definite, ie it doesn't mean the price is gonna be driven up again soon, some weeks hanging around did happen in past such occasions too, still it tends to signal a new cyclus (price back up again).
So $13, according to aboves viewpoint, looks now less likely due to this switch back to increased hedging.
A typical strategy they perform is to take positions on weakness, not too many at once, as to prevent the real market bottom price sellers to get some hope on higher price and thus suspend their selling low.
Nevertheless, my argument of record low total net position, was wrong on the moment of my last purchase. I had the previous week in mind. The difference was about 10000 contracts, so 50 Moz price impact, and since I estimated (along long term data series comparison) a 70Moz supply/demand change per price dollar, still 70 cents. Not that it matters upto now, since the futures market didn't give us a chance yet(?) to buy at $13.xx.
It also indicates how important it is to combine data of same time before making statements. One of the most exercised means of misleading is to not do exactly that. It makes the difference between good and bad decisions though, since some event can already be "priced in", and those that think they were ahead (succeeded in frontrunning others), wrong.
About my other argument, "futures market hedgers net long", this is also something to think twice about.
This is about Trader Classes, to which all the futures traders are categorized to by the CFTC. The CFTC does this by taking into account the DOMINANT activity of the trader, and the size of the trades. That dominant activity is no eternal flag. The CFTC can review it / change it, classify a same trader under another class, simply due to dominant activity changed. Institutional traders, usually acting through swap dealers, can switch from dominant selling to dominant buying, causing them to be reclassified under a demand side Trader Class.
So Commercial Hedgers that become net long, doesn't imply that they see no price downwards risk. Implicitly, another Trader Class has to make too such a switch, and in this case it were the Large Traders class. Statistics show that these usually reside on the winning side, and they indeed were / are net short during this downtrend.
One can see, at peak prices, these Large Traders sit at peak total net long position, and on bottom prices, they sit at bottom total net long position or even a short position (as now is the case). This is the underlying of that new cyclus signal.
For me, it all won't matter, I don't intend to sell and don't intend to buy. My "dry powder" was SHOT.
Gullintanni
Well-Known Member
Pirocco i think following the futures market is probably part of the reason you have mistimed physical buys as they 2 are not really related at all in silver price.
Why do people use the futures market in the first place?
Why do people take short positions vs long positions?
I am sure you already know the answer and it is clear even in my simple wee head that more short positions will generally mean that people have just ordered future physical and want the price locked in .
Of course you have speculators as well but they again do not dictate price, the futures to me is an insurance avenue and not a price setter.
Why do people use the futures market in the first place?
Why do people take short positions vs long positions?
I am sure you already know the answer and it is clear even in my simple wee head that more short positions will generally mean that people have just ordered future physical and want the price locked in .
Of course you have speculators as well but they again do not dictate price, the futures to me is an insurance avenue and not a price setter.
Hope no one minds but just wanted to chime in...
"Pirocco i think following the futures market is probably part of the reason you have mistimed physical buys as they 2 are not really related at all in silver price." I honestly wish this was the case but unfortunately not. The spot price is taken from the futures market which sets the physical price (obviously after USD to AUD conversion plus baring price). Its pretty easy to mistime physical buys when the market behaves in odd and strangle ways.
"Why do people use the futures market in the first place?" Like any market, ultimately to make money. In the simplest terms, Futures market is where two people take a bet. A 'long' means buying and a 'short' mean to sell. Theres guys prefer to play with paper than the hassle of physical ownership/delivery of the contract
"Why do people take short positions vs long positions?" As above but more importantly in my option, is that most trades are done by bots using tech analysis. The result of this currently is a net short of non-commericals who got tricked into the wrong side of the trade. The commercials (who have been net short many many many years) are now net long. This to me is extremely bullish news. Its like saying the bully in the playground is now your friend. Not really what you ever expected but hey, if it means less lunchtime beatings then the outcome is better than the journey
My hope? that I can get physical at a lower price but not confident that will eventuate with a lower spot price. The AUD spot is around $20, but see what the physical price on a one ounce round is in comparison. The mining/production costs cause a floor in the physical which only increases the baring(casting cost) with a lower spot price
Pirocco
Well-Known Member
The futures market is NOT where bets are made, instead it is the opposite: to make sure that they don't have to pay more, or receive less, than intended / contractual (real market not futures market) agreed upon.
The futures market is thus a place to hedge contracts on the real market.
There is no profit on the whole (real+futures), the hedge also wipes out any potential "windfall" gains, just like it wiped out similar "windfall" losses.
And that is also why a futures position costs just a fraction (the margin) of a real market position. For a small extra cost, you can hedge against a much bigger cost.
And the futures markets mechanism (providing profit until the futures price of the next month and spot price are equal, causing arbitration trades) will drive the spot price towards to the futures price, causing the real market buyers to have to pay extra, with the extra being the ultimate (end to end) source of the dollars streaming between futures market accounts, compensating for an eventual price change caused by the real market buyers.
The futures market is thus a legal way to frontrun speculators.
Just imagine, you want to buy 10000 oz, to sell later back to the dealer at a higher price.
That dealer of course doesn't like that, so he thinks, let ME drive the price up BEFORE he's buying from me.
Without a futures market, the dealer would to actually buy that silver before you buy it from him.
With a futures market, the dealer can just buy that amount silver as paper, driving the price up without any need for silver.
To then cancel the paper (by letting it expire or by adding an equal opposite paper position).
How convenient.
And as explained, that the commercial trader class now is net long, may be exceptional for silver, but every long implies a short - no buyer without a seller and vice versa, so that the large trader class now is net short, is ALSO exceptional for silver.
But this is not exceptional for futures market as a whole, look at
For copper, it happens many times that commercial hedgers (= dominantly - not exclusively * the supply, the selling side) went net long and the implied other trader class or classes, the opposite.
That's why one has to think twice before concluding anything.
The futures market is thus a place to hedge contracts on the real market.
There is no profit on the whole (real+futures), the hedge also wipes out any potential "windfall" gains, just like it wiped out similar "windfall" losses.
And that is also why a futures position costs just a fraction (the margin) of a real market position. For a small extra cost, you can hedge against a much bigger cost.
And the futures markets mechanism (providing profit until the futures price of the next month and spot price are equal, causing arbitration trades) will drive the spot price towards to the futures price, causing the real market buyers to have to pay extra, with the extra being the ultimate (end to end) source of the dollars streaming between futures market accounts, compensating for an eventual price change caused by the real market buyers.
The futures market is thus a legal way to frontrun speculators.
Just imagine, you want to buy 10000 oz, to sell later back to the dealer at a higher price.
That dealer of course doesn't like that, so he thinks, let ME drive the price up BEFORE he's buying from me.
Without a futures market, the dealer would to actually buy that silver before you buy it from him.
With a futures market, the dealer can just buy that amount silver as paper, driving the price up without any need for silver.
To then cancel the paper (by letting it expire or by adding an equal opposite paper position).
How convenient.
And as explained, that the commercial trader class now is net long, may be exceptional for silver, but every long implies a short - no buyer without a seller and vice versa, so that the large trader class now is net short, is ALSO exceptional for silver.
But this is not exceptional for futures market as a whole, look at
For copper, it happens many times that commercial hedgers (= dominantly - not exclusively * the supply, the selling side) went net long and the implied other trader class or classes, the opposite.
That's why one has to think twice before concluding anything.
Gullintanni
Well-Known Member
So i guess while Ag disagrees with my thoughts ,Pirocco agrees?
I have always considered the futures markets like insurance policies for purchases with some speculators thrown in to cover the OTHERSIDE.
I mean if you order 10,000 ozs @spot $$$$ but have to wait for delivery then you take a sort position just incase the price crashes and anything you lose on price between payment and delivery is paid out with the short position and you wind up in an equal or better position?
And the speculator is most likely going to be then one taking the otherside of the trade with you?
I mean we having commodity markets to set the price so i am struggling to see what futures have to do with guessing a price.
In fact if there were heaps of shorts coming into play one could easily assume that plenty of metal has be bought so the price will go up, yet i hear many people claim short positions mean a drop is imminent yet it is those shorts that most likely signify SALES.
I have always considered the futures markets like insurance policies for purchases with some speculators thrown in to cover the OTHERSIDE.
I mean if you order 10,000 ozs @spot $$$$ but have to wait for delivery then you take a sort position just incase the price crashes and anything you lose on price between payment and delivery is paid out with the short position and you wind up in an equal or better position?
And the speculator is most likely going to be then one taking the otherside of the trade with you?
I mean we having commodity markets to set the price so i am struggling to see what futures have to do with guessing a price.
In fact if there were heaps of shorts coming into play one could easily assume that plenty of metal has be bought so the price will go up, yet i hear many people claim short positions mean a drop is imminent yet it is those shorts that most likely signify SALES.
Gullintanni
Well-Known Member
Can silver close this week @ $13.75?
Im going to say very verylikely possible.
Im going to say very very
Agree and of course the futures market is designed to lock a price and hedge against. Reality is I doubt too many of us a loading into contracts while offsetting physical purchases to match. In many cases for the future market, it is to take physical delivery of the commodey (wheat, oil,etc) but this isn't IMHO the case for silver. I doubt the current 100,000 short's (500,000oz) are actually available for delivery
"...but every long implies a short - no buyer without a seller and vice versa," agreed but what happens when the commercials DON'T bite? you can have a short squeeze which will be a nasty pill to swallow for the non commercials
"So i guess while Ag disagrees with my thoughts ,Pirocco agrees?" well if it's that the futures market doesn't set the spot price then yes, do disagree. I'm curious what does set the spot price if "as they 2 are not really related at all in silver price."?
Just my opinion
"...but every long implies a short - no buyer without a seller and vice versa," agreed but what happens when the commercials DON'T bite? you can have a short squeeze which will be a nasty pill to swallow for the non commercials
"So i guess while Ag disagrees with my thoughts ,Pirocco agrees?" well if it's that the futures market doesn't set the spot price then yes, do disagree. I'm curious what does set the spot price if "as they 2 are not really related at all in silver price."?
Just my opinion
Agree and of course the futures market is designed to lock a price and hedge against. Reality is I doubt too many of us a loading into contracts while offsetting physical purchases to match. In many cases for the future market, it is to take physical delivery of the commodey (wheat, oil,etc) but this isn't IMHO the case for silver. I doubt the current 100,000 short's (500,000oz) are actually available for delivery.
"...but every long implies a short - no buyer without a seller and vice versa," agreed but what happens when the commercials DON'T bite? you can have a short squeeze which will be a nasty pill to swallow for the non commercials
"So i guess while Ag disagrees with my thoughts ,Pirocco agrees?" well if it's that the futures market doesn't set the spot price then yes, do disagree. I'm curious what does set the spot price if "as they 2 are not really related at all in silver price."?
Just my opinion
As a novice, from what I understand, please correct me if I'm wrong, paper remains as paper until the paper long buyers (commercials) demands for physical delivery of silver (assuming they are allowed to do this by contract). Of course, by then, there won't be any physical silver that can be bought at any reasonable price. Physical sellers will be asking $50 above "paper spot".
As you can see, it's now a very risky game for the shorts. They can only make $1-3 in the best scenario, but stand to lose $10-$30.
Perhaps this is why commercials are now net long? They are the producers of silver, so they can control physical supply and kill the shorts if the market changes. I mean if the producers of silver don't sell to COMEX, where will all the physical silver come from?
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And there is no guarantee the dealers will follow spot all the way down. I see that happening to a certain degree with kilos already
Are you referring to lunar kilos? If so, I'm not seeing this for at least the recent ones like Monkey, dog and rooster. The prices appear to be gradually dropping over the last 3 months.
The price of the 10kg appear to be fixed though.
I know I shouldn't be commenting on something that I don't know much, but I find the optimism on Sydney RE on some of the other threads somewhat puzzling as compared to the pessimism over silver prices. Imagine if you could buy a house at below the cost of building it. Land is given away free, developers earn nothing out of it. People will be scared of buying it.
Not saying that Sydney RE will go down, or silver prices will go up, but sort of backs my suspicion that people are attracted to stuff at record high prices, but are scared of stuff at record low prices.
This is also true to RE in other places like Singapore, hong kong, cities in China, etc.
https://in.reuters.com/article/chin...es-accelerates-to-two-year-high-idINL3N1W3017
Perhaps if and after Silver has fallen to $13ish, we'll be talking about $10 then.
Not saying that Sydney RE will go down, or silver prices will go up, but sort of backs my suspicion that people are attracted to stuff at record high prices, but are scared of stuff at record low prices.
This is also true to RE in other places like Singapore, hong kong, cities in China, etc.
https://in.reuters.com/article/chin...es-accelerates-to-two-year-high-idINL3N1W3017
Perhaps if and after Silver has fallen to $13ish, we'll be talking about $10 then.
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people chase high and move away from low. The higher go higher and the lower go lower.
Is that hold for for silver?
Is that hold for for silver?
we never know what is the turning point would be, when this time it could be much worst
when it was $8.50 people paid $12 for metal Ag last time
if it really went that low again, metal Ag may not be below $12 last time the delivered weight was 119 million ounces
we would not be sure it any amount will change hands
when it was $8.50 people paid $12 for metal Ag last time
if it really went that low again, metal Ag may not be below $12 last time the delivered weight was 119 million ounces
we would not be sure it any amount will change hands
In the futures market, Paper stays paper.....the two parties settle by paying/receiving the difference between the initial price and the price on the contract (delivery) date.
If one wants physical metal they buy from a local dealer or if buying 10 kilos plus of AU or tonnes AG they buy from commercial LME refiners.
Pirocco
Well-Known Member
You missed halve the point of a futures market.
It's an insurance policy for a buyer.
But it's ALSO an insurance policy for a seller.
No need to thrown in speculators, actually a futures market exists precisely AGAINST speculators.
Imagine a silver miner.
And a silver blancs producer (for Mints).
The blancs producer needs the silver from the miner to produce blancs.
Both parties have a profit target.
The blancs producer orders 10000 oz silver bars from the miner, to deliver over 3 months, at current silver price $14
Now, till then (+3 monts) the blancs producer is at risk, is "exposed" to a potentially rising silver price.
And ALSO, the miner is "exposed" to a potentially dropping silver price.
In order to get rid of this risk / exposure, the blancs producer takes 2 long futures market positions.
And ALSO, the miner takes 2 short futures market positions.
Both sides will, in the case of a changed silver price, accumulate the cost difference on their futures accounts, dollars that will compensate for the changed silver price.
If the +3 months silver price would have risen to $15, the blancs producer will have accumulated 10000 x ($15 - $14) = 10000 dollars, and thus be able to pay the 10000 oz at the higher price.
And if the +3months silver price would have dropped to $13, the miner will have accumulated the same 10000 dollars.
In both former and latter price change case, none of both gains a dollar.
Because for ex, if the price would drop from $14 to $13, the blancs producer will lose 10000 dollars on his futures market account, and thus miss this windfall gain just like the miner would in the case of a +1 rising silver price.