Pump and dump - good for dealers or no?

Miksture

Miksture

Active Member
Silver Stacker
It is a while now since gold and silver have been targeted for the pump and dump. Recently bitcoin et al had an episode of it and I am wondering if the time for pm's is coming around again.

One of the phenomena that predicts a pump and dump is the media pumping pm's and attracting speculators. These speculators buy futures which pumps up spot. A lot of small time speculators start looking at physical metals and begin buying products as the prices continue to rise. Hype goes into over drive in the media and bullion sellers can't get enough stock to feed the hungry hoards of new pm investors.

After a while the paper pm market cools and brings the physical pm market down with it. The hordes try to sell their physical metals to dealers to cut their losses and many dealers, what, buy knowing they are likely to make further losses?

So on the upswing the bullion retailers make gains from their old stock piles, which are probably reasonably small. They make gains on buying new products and selling them a few days later for higher price plus a nice premium. The rate of turnover is high and the gain from premiums alone is high.

On the downswing, it seems to me that they are in trouble. Sales drop, stock on hand devalues and more. Buy back is risky and the future trends downward for some years with a reducing population of more and more disillusioned bullion stackers as their major prospects.

Have I got this wrong?
 
Interesting, may I ask why you think the gains for premium is high?
I doubt dealers buy "new" stock at spot, ie Perth Mint doesn't sell Lunars to Dealers at spot, there is delivery cost, insurance, storage/rent cost, staff cost and profit.

When I look at small dealers, and their inventory, Id imagine selling it all and depositing 70% in to safe interest accounts and a 30% into a mutual fund, will far exceed the returns.

Also there are more bullion buyers than ever before as Chinese and Indians buy more and more as they get richer.... The prices is not increasing because gold miners are finding more and more gold to dig out
 
Ipv6Ready said:
Interesting, may I ask why you think the gains for premium is high?
I doubt dealers buy "new" stock at spot, ie Perth Mint doesn't sell Lunars to Dealers at spot, there is delivery cost, insurance, storage/rent cost, staff cost and profit.

When I look at small dealers, and their inventory, Id imagine selling it all and depositing 70% in to safe interest accounts and a 30% into a mutual fund, will far exceed the returns.

Also there are more bullion buyers than ever before as Chinese and Indians buy more and more as they get richer.... The prices is not increasing because gold miners are finding more and more gold to dig out
Click to expand...

Well, if you buy from coin dealers and such premiums can get up to 30% and more. There are some very good bullion dealers around with reasonable premiums but if you are a newby stacker you often buy from coin dealers to begin with. Also, some of the dealers that are close to me have been very high premium sellers in the past. In recent times they are struggling to get sales volumes and have shaved premiums.
 
The "paper" market is the hedge of some entities (silver producers/resellers-dealers) on the physical market, against other entities (stacker-speculators) on the physical market.
So describing the "paper" market as if it's a story on its own aside the physical market, is not reality.
Futures markets markets were created for the same reason central banks were created: to fight people that save their money and try to avoid losing purchasing power, being described as "speculators".
Those that produce / deal in silver, don't want to be inflicted less profit / loss due to speculators, so they brought a futures market into existence, that facilitates frontrunning speculators.
The producers/dealers place a 1 Moz order between them, and simultaneously both take a 1 Moz / 5000 opposite position on the futures market, which alters spot along a now different forward/future price and a profit when swapping different term-futures contracts between eachother, this profit is grabbed on the fly with spot, driving the spot price towards its forward/future price (the nearest month first).

Just imagine that you would buy 500 oz at $20/oz from a dealer, to then sell it back to him at $30/oz.
YES, that is what you as a stacker tries to do.
Do you think that they have no problem with that?
They have, and they act against you, preventive, by frontrunning you and inflict you instead a higher price to start with, along the futures market.
Even IF you succeed in that buy $20 > sell $30, they will have accumulated on their futures account $10 x 500 = $5000, compensating their loss. And that $5000, origins from those that purchased AFTER they placed their hedge.

That's why it's generally a better idea to stack silver on moments that the total net futures market position sits on a low, like currently.
Of course, the futures markets hedging is not the only price driver. Other stackers may have frontrunned you too. :P
 
If for example stooges like RT Max and Stacey etc hype it again, it will happen.
In the absence of another such scam, it won’t happen.
Long term price charts tell the truth.
999 bullion is a good store of wealth.
The odd collectible is good fun, and possibly a good investment
But big picture; it’s a very tax effective store of wealth with very ordinary long term ROI.
No more. No less.
 
I should add.
For losers like me who never saved a cent in their life, buying and stashing bullion is a smart way to save money over the long term.
How many ounces of silver could you buy for your beer, cigarettes, hair styles etc.
I worked out once that I’d spent over $200,000 in my lifetime on booze, records, cassettes, CD’s, guitars etc.
What if I’d spent even half of it on bullion.
40 years of money spent for shit.
 
Swoydaz and paranoid android I tend to agree. What worries me is that there needs to be buyers when you are ready to sell. Those spikes attract people's interest and keep the businesses that buy our stacks going. At the moment there doesn't seem to me to be enough new blood coming through to replace the ones we lose through attrition. I am really a late comer and joined the stackers scene in 2014 where (in AUD) I have watched sliver move basically sideways with occasional ups and downs. Gold has generally increased pretty well moving from about $1400 to over 1600 with a bit of 1800 recently. So for me stacking has been good. It seems odd that given this improvement in AUD value that the dealers still are closing without being replaced.
 
Other facet we need to look at is that gold/silver is priced in US dollar. And the "Value" of gold/silver is different against each and every currency

If one is in China, with the yuan depreciating against US dollar, so for a Chinese person valuing gold in Yuan, the value would be increasing

In the US, over the last two year, gold has being highest at $1360 USD and lowest 1130 USD a spread of $230, the the large increase of Gold in Aussie dollar terms is actually Aussie Peso tanking against the US dollar
 
The real problem is that the central planning thieves have reduced the speculative markets to a situation of a sure loss for private trading entities as a whole, so one trader can only win by inflicting other trader(s) an equal loss. With "traders" including bullion dealers. Bullion dealers are also just people that want to make a living, so if their customers/stackers would become smarter than them, they would bear the loss, and vice versa.
In a world without central planning thieves, a bullion (and whatever means of value storage) dealer would just play a banking role with a profit based on the performance in that role.
 
Miksture said:
Swoydaz and paranoid android I tend to agree. What worries me is that there needs to be buyers when you are ready to sell. Those spikes attract people's interest and keep the businesses that buy our stacks going. At the moment there doesn't seem to me to be enough new blood coming through to replace the ones we lose through attrition. I am really a late comer and joined the stackers scene in 2014 where (in AUD) I have watched sliver move basically sideways with occasional ups and downs. Gold has generally increased pretty well moving from about $1400 to over 1600 with a bit of 1800 recently. So for me stacking has been good. It seems odd that given this improvement in AUD value that the dealers still are closing without being replaced.
Click to expand...
Gold has central planners buying with you, inflicting you less ounces.
And in a future will have central planners selling with you, inflicting you less AUD.
The main reason I opted for silver.
According to historical gold and silver data, a typical central planning strategy in a pm bull market (read: speculator buying) is, when needed, to support gold relative to silver, making gold thus appear as "more reliable", luring silver speculators away to gold, to then dump that support. :p
From this perspective, one that buys silver, also supports gold, because the central planners don't like a low GSR that may lure speculators more to silver, whose price they cannot control as well as gold (some side effects due to industrial use).
 
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