#silversqueeze

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Bob Coleman said:
#Gold and #Silver Exchange for Physical (#EFP) discussion

The following may be technical in detail, however I hope it helps educate others how the precious metals markets function.

On December 11, 2024 we had a blow out to the upside on the EFP premium. This meant that the futures price went to an extreme premium relative to the spot price.

Gold February contract to Gold spot went to a $45 premium (normal was about $24 premium)
Silver March contract to Silver Spot went to a $1.05 premium (normal was about 45 cent premium)

Normally, when this occurs, arbitrage trading would have players deliver physical to the Comex and short the lead month contract. This would alleviate the abnormal pricing environment.

speed up to today's EFP :
Gold February contract to Gold spot went to a $12 premium (normal is about $13 premium)
Silver March contract to Silver Spot went to a $.53 premium (normal is about 35 cent premium)

As one can see, Gold has normalized while Silver is still elevated. The chart below shows the increase in the Gold Comex registered category which helped alleviate the EFP premium while the Silver Comex registered category saw a decline in ounces. This seems to explain why the Silver EFP is still unusually elevated. Players have yet to deliver silver 1000 oz bars. This could be due to the elevated premiums they would have to pay to obtain the bars. Normally when bar premiums are elevated, that is a sign of tightness.
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Context:

 
Banks are tightening up. I don't think they can hide their disasters much longer. I'm sure some is end of year stuff but the number and size of holes in the damn is increasing rapidly.
 
Voodoo said:
I think 1000 oz bars have been 50-60 cent premiums for some time now. I like to check SD for those from time to time.
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Maybe it's moar a function of silver the industrial metal.

One-ounce bars are useless for an industrial customer. Thousand-ounce bars, on pallets, say, could constitute a smallish delivery for industrial operations.

...I'm just speculating. I don't know how industrial users buy the metal; but silver has always had two roles. And silver-as-metal is, if anything, declining in popularity. The enthusiast-believers are vocal and promotive; but the raw numbers aren't there.

Our society is stratifying - the very rich and very poor. The few very-rich who don't believe in dollars, hold it in gold. The very poor, don't have a lot to play with, now. Thousand-dollar car payments; $3000/month mortgage payments, for a crappy bungalow; and food prices doubling, probably means what silver such a person bought, years ago, has probably been sold. At breakeven or a loss.
 
It could just be that SD Bullion 1,000 oz bars are not really indicative of the real industrial market. Perhaps they just keep a few on hand but they are clearly marketing to retail. I doubt a Tesla goes to pick up a couple bars on SD.
 
Voodoo said:
It could just be that SD Bullion 1,000 oz bars are not really indicative of the real industrial market. Perhaps they just keep a few on hand but they are clearly marketing to retail. I doubt a Tesla goes to pick up a couple bars on SD.
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That's what I'm wondering. Industries that do require silver...how is it delivered? We know how bulk steel is delivered - plates or bars, for those industries who cannot process iron ore on-site. How is industrial silver shipped?
 
I think most is either silver shot or 1,000 oz bars. But they could easily have wholesale prices that are different than SD retail pricing.
 
Voodoo said:
I think most is either silver shot or 1,000 oz bars. But they could easily have wholesale prices that are different than SD retail pricing.
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Yeah, but, increased demand, on a certain form, puts a premium on the price for it in that form.

Industrial buyers don't go to retail bullion stores; but both of them go to essentially, the same middlemen competing for the same forms. Silver bullion rounds or small bars, there is not the demand for. Bullion retail is a cyclical business; whereas an industrial buyer or middleman is a steady customer, with shallower dips and increases in orders.

So, the refiners or middlemen are going to discourage retail bullion retailers or distributors from buying larger forms.
 
Hmm, here is a new thought. Sounds like this may have come from PSLV (think he is referring to the original silver squeeze back in 2021). Listen to what Rick Rule has to say here. Had some days with $50 million inflows. Cleaned out quite a few cities.

 
#silversqueeze dynamics explained

 
Moar!

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Further clarification on the silver situation and yesterdays article tagged below.

The article mentioned the following
“In the #silver market, major dealers can ship metal from London to New York warehouses to close out arbitrage trades, and 15 million ounces of silver have been added in Comex silver warehouses during the past five weeks.”

When it comes to financial and collateralized trades not all silver represented in the Comex stock report are the same. It is important to note that these 15 million silver ounces may not represent available silver to close out arbitrage trades. Some of that silver is privately held. In order to settle a short position with physical silver on the Comex, silver must be put on receipt/warrant and delivered into the registered category where these warrants can be delivered to another clearing firm. The eligible category has silver with no warrant attached.

The article failed to note that registered category actually saw a decline of 5,749,286 silver ozs, while the eligible category saw an increase of 20,674,179 silver ozs. Yes, silver can be transferred from eligible to registered, however, for those who are short futures or worse, short the EFP (Exchange for Physical spread trade), margin or collateral calls must be met with closing shorts, putting up hard dollars or delivering silver which is on receipt as collateral or hedge. We can see Silver has not been put on receipt and just the opposite is happening. This is why the EFP continues to blow out. Participants may be scrambling to find and deliver silver. What adds to this stress is banks seem to be lifting offers on 1000 oz bars, essentially lifting the purchase premium above spot.

Please remember, we are dealing with massive leverage not only on futures contracts but options and private party OTC trades (EFP). These spreads are designed to decline as time gets closer to the futures delivery month. Seeing this go in reverse has possibly trapped many participants.

This is the classic short squeeze with a lot of leverage added. The question is will the silver arrive by boat and into the Comex warehouses to cover the short positions by January 20, 2024 (Inauguration Day) and if not, will any of this silver be subject to tariffs if President Trump implements his tariff policies.
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Smells like more liquidity concerns cropping up in markets. Andrew Maquire basically says the same thing, in 60 mins of words.

 
No, but he is also my source for changes to COMEX margin requirements. He runs a private gold and silver vault operation and I believe that he is buying/trading with the exchanges.
 
Isn't that almost the same as the Silver price in China? Your last post in the other thread says $32.45 and I see spot at (at least the Mar 25 most traded COMEX contract) now at 31.32. So that would be a $1.13 premium.

Looks to be like the London riggers are simply out of metal and China physical markets are asserting dominance.
 
It definitely appears as if there is some stress in the physical markets. Whether it's short term induced from trying to front run potential Trump tariffs or indicative of a more serious fundamental structural problem (what #silversqueeze is waiting for) remains to be seen.
 
Too bad all the miners are not seeing the message. Silver finally having a good day (and despite a 1.0 correlation for GDX and Silver, which should not be) silver miners are still mostly red. Oh and stonks are BIG green so they don't have that excuse either.
 
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