Market Curiosity: Exploring Markets And Systems

May 4, 2011

Why silver shares could be much preferred over SLV and Comex silver.

Filed under: Just Watching — Tags: — Jeff Fitzmyers @ 4:28 pm

I’m thinking, “Wow, Comex supply (real and imagined) is really strong compared to demand. If price gets pushed too far down, that loads the spring for price too really snap back, and makes physical much more attractive, and why would that be wanted?? Why not keep price high and volatile?”

It could be that some entities are simply exiting the Comex and SLV in general. I always assumed Comex prices would skyrocket if things come to light leading to problems for longs as Comex changes the rules, etc. making it challenging for those with little political power to cash in. Maybe there is scant silver there, but someone would end up with it.

However, what if Comex says SLV has the silver, and SLV says, don’t look at us!, Comex has the silver? Things would be very challenging even to those with political power.

So the only paper alternatives are mining shares, and Mr. Smiths’s invisible hand might be getting busy. Supporting items:
+ Mr Sprott selling a small portion of PSLV and moving into physical and mining shares. Although this can be explained by realizing the +20% NAV potential profit. But also Mr Sprott noted, “It’s a travesty of a trading system that would happen [on Sunday night].”
+ The reclassification of registered Comex silver to eligible. If that silver (reportedly) simply needs electronic warrants, why not just get them? Why bother to “reclassify”, when it’s so seemingly easy to get the warrant??

Currently this is not that big a correction relative to historical events, so the above likely does not necessarily apply. But if price just keeps diving for zero, something else is going on.

Related
+ Since silver backwardation is growing shouldn’t price be rising to meet the demand?
+ Mr Ferguson really put things in perspective tonight: 6,600 contracts clears out the Comex

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