Market Curiosity: Exploring Markets And Systems

October 21, 2011

Charts of JPM’s year to date client and house Ag, Au issuing and stopping activity.

Filed under: Just Watching — Tags: , , , , — Jeff Fitzmyers @ 9:28 pm

COMEX & NYMEX Metal Delivery Notices, year to date

Russia cbank says will raise gold share in reserves “We are acquiring huge volumes (of gold),” Ulyukayev told the parliament… the central bank data showed that Russia’s gold and forex reserves, the world’s third largest, rose to $517.7 billion”

Well, could you please flip a measly billion and clear out the COMEX just for fun??

London Trader – Sovereign Silver Buying, Middle-East Shortages I deal in the physical market every day… There is extraordinarily tight supply right now in Asia.  When you order silver there is so little available at these prices, that’s the trouble.  You can order it all day long, but you are going to have to wait for it… As soon as we see a delay in shipments to end users they will race each other to stock up.  This will send the price of silver through the roof and break the backs of the silver shorts.

April 26, 2011

Silver still in backwardation. Just waiting for the correction to end.

Filed under: Just Watching — Tags: , , , , , , , , — Jeff Fitzmyers @ 11:34 am

James Turk: The important point Eric is that silver is still in backwardation. I mentioned to you previously in the KWN blog piece on April 1st of this year that if silver remained in backwardation when we neared the $50 area it would be a truly extraordinary event. Here we are with silver touching $49 in Asian trading this morning, yet it remains in a 63 cent backwardation from spot to December 2015.

I can’t stress enough how significant that event is. Over the past three months the price of silver has nearly doubled, yet the backwardation has not disappeared. Markets are not designed to work that way, the higher price is supposed to entice people to sell their physical and hold dollars instead. I think the market is quite clearly sending the signal that people would rather hold silver instead of paper money.

The bottom line is that as long as silver remains in backwardation, price declines will be short-lived, it’s also telling us that silver has not yet reached a top on this move.

In fact, LBMA is going into backwardation again indicating that significantly rising silver prices have

Comex partial backwardation is alive and well.

Starting to notice that SLW calls are coming down in price a fair bit. hmmm… Curious if SLW might go down to 35.50 ish briefly and then the far out of the money SEP calls might be attractive??

Hows the dollar index? Surely it popped up a lot when “real money” dropped yesterday?? Well, no. It went down.

April 1, 2011

Silver update for April 1st

Filed under: Just Watching — Tags: , , — Jeff Fitzmyers @ 11:36 am

James Turk on silver backwardation: …we’ve gone from $27 to over $37, again about a 40% rise in price and the backwardation is still there. It hasn’t disappeared. So what that suggests to me is that there is tremendous physical demand for silver. This is a very, very rare event and it’s very bullish.

Once silver gets above 37.80 -38.00, I would imagine it will short a bit higher. And look at how each dip is aggressively bought.

Scotia Mocatta out of 4 of 7 silver offerings again. It has been out of at least one kind of metal for at least a month or 2.

March 18, 2011

Silver backwardation update – March 18 – about the same

Filed under: Just Watching — Tags: , , , , , — Jeff Fitzmyers @ 7:41 am

Zero Hedge: According to several sources the Fed spent 50 million in USDJPY purchases. Alas that will not be enough. And with the USDJPY continuing to leak lower… already cost the ECB at least $5 billion… Perhaps it is time to ask why Japan (and the central banking cartel) has spent almost half a trillion dollars to preserve capital markets instead of giving that money to the millions of earthquake disaster victims…

King World News interviewed Rick Rule: Dollar demand for silver is outpacing dollar demand for gold. I keep hearing that there could be problems in near term futures delivery, that is more metals stood for physical delivery than the market has the ability to produce. Certainly the events of the last 90 or 120 days in terms of physical metal being withdrawn from the market has impacted the ability of mints like the Royal Canadian Mint and the US Mint to buy silver strip or coin stock. So you’re seeing the inability of dealers to get as much silver coin or silver bar as buyers have demanded.

Still wondering if the 12 month SIFO is going to take another dive…

March 2, 2011

US dollar nearing the supporting trendline for the 5th time

Filed under: Just Watching — Tags: , , , , , , , — Jeff Fitzmyers @ 8:40 pm

James Turk on King World News: Eric you have been saying all along that the dollar isn’t bouncing and it now appears the dollar is ready to fall off of the edge of a cliff. The dollar collapse is going to be the next big story. If I am right and the dollar really starts to dive, the implications are global in nature and I truly believe this event will shock the world.

This is what the world is valuing the past 5 days:

Surely priorities were different after the reported Libyan air strike?? Nope.

Weekly dollar index:

Monthly dollar index at MRCI.com

Daily chart:

Xiphos Trading’s take on the dollar index.

Silver update for March 2, slightly more LBMA backwardation, slightly less at the COMEX, and scarcity reports continue.

King World News interviews Rick Rule, “…one of the most street smart level-headed individuals in the business.”There is more silver called for delivery than there is silver to deliver. This has created backwardation in silver and this is an extremely unusual situation in this market. This occurs when there is scarcity of silver. Anecdotally, my sources tell me that demand for physical silver is outstripping demand for gold on dollar for dollar basis in European and North American markets.

Certainly what is of interest to me is the limited availability of new mine supply including byproduct supply in view of increasing demand. Meaning in addition to the near-term you could see explosive action in silver in the future. You could also see a sustained two or three year bull market in silver simply because supply isn’t sufficient to meet intermediate-term demand.

I don’t know how you solve a structural failure to deliver. I don’t know if regulators or exchange officials would allow a force majeure until markets could stabilize. What I do know is that set of circumstances would further destabilize the silver market and markedly increase speculative interest.

Paul Mylchreest, Gresham’s Law Squared – gearing up for
Game Over:
David Morgan on shortage in the wholesale silver market: 21 February: “But the real key is are we short on the commercial side, the 1,000 oz. bar size. And I spent a great deal of time this morning talking to the top of the pile, you might say, on the wholesale side… it looks as if we are now in that situation. I don’t want to get everybody over-excited but it seems as if, from really good sources, and I source it in two places, one in North America and one in Europe, there is more demand on the commercial bar side than they are able to produce currently.

A friend of mine stood for physical delivery of a small number of contracts in the December 2010 silver contract. He paid a visit to the (very large) bullion bank to find out when he would receive his metal since it was already paid for. The employee of the bank said that my friend was not permitted to enter the vault and (very interestingly) that the bank was no longer allowing the employee to enter the vault either. Now why would that be? My friend was told that in order to take delivery of his silver, he would need to fill out a form which would then have to be processed through the bank’s compliance department. It was supposed to take a week, but that was more than five weeks ago. [plus a lot of interesting history]

Ed Steer: I have some interesting news from the Royal Canadian Mint. It seems that their new 1-ounce silver coin, the grizzly bear, is missing in action at the moment. All the major suppliers in both Canada and the United States have their orders in, but the scuttlebutt yesterday was that the mint was having trouble getting the silver to make them…and the suppliers were going to be allocated much smaller amounts than they had originally ordered when they finally are made. The suppliers I’m talking about are the likes of Tulving and A-Mark

The following 2 charts from Mr Steer’s post suggest that any near term interest rate rises in short dated debt will be immediately expensive.

The main change at the LBMA is the 12 month dipped lower and is quite a bit lower than the other months. The current backwardation relative to the 12 month SIFO is now 2 days longer than 2008’s and still twice as deep.

Open interest for yesterday is reported at 2,251 contracts or about 11 million ounces — 25% of COMEX’s reported available ounces.

COMEX silver still in partial backwardation. $1.08 between front month and Dec 2015. The contango of the front months is slight but has extended out 1 more month to July.

If the price pattern is similar to 1979, it’s reasonable to expect silver to continue rising for the next 2 months.

James Turk on King World News: I think the major message in silver is that every dip is well bid for. The shorts and other big players may gun for stops from time to time, but they can’t change the underlying trend, or the very bullish fundamental picture… When the gold and silver markets start becoming disorderly, then we will know the metals are going to take a breather. But everything at the moment says we should be focusing on higher prices for both gold and silver.

References
+ Silver, backwardation update on March 1: LBMA 13 days, COMEX (partial) 19 days

February 28, 2011

Silver backwardation update on Feb 28th: LBMA 12 days, COMEX (partial) 18 days, both about the same

Filed under: Just Watching — Tags: , , , , , , — Jeff Fitzmyers @ 12:08 pm

Ben Davies on King World News:Positive silver lease rates at this point are more a function of credit risks, i.e. counter-party concerns, than they are about egregious metals shortages although metals shortages clearly exist… Right now it would appear that as the March/May spread is not moving wider, it is unlikely that we will experience commercial signal failure. Certainly open interest on the March contract is reduced to 4,000 contracts. Having said that, it only takes a few short contract holders failing to deliver to set off a short squeeze in the market.

4,000 contracts, as of Friday, is still 20 million ounces — half of what is available. Open interest will likely drop today too.

UPDATE March 3: I have some mistakes on the chart. This one is correct. The following 1 is not correct. A similar price rise for 2011 targets 38 $/oz.

The 2011 12 month SIFO is 3 times deeper than 2008. Will that translate to 3 times greater price rise, or length of time prices rises in 2011? Maybe both?? If we incorporate Mr Davies info, that might suggest the 2011 12 backwardation could be prolonged — but I wold not expect that all the way out to 12 months. And it does seem to impact the original low of -0 .06000.

Preliminary data shows 1.14 difference between March 2011 and December 2015.

References
+ Silver, backwardation update for Feb 26th

February 26, 2011

Silver, backwardation update for Feb 26th

Filed under: Just Watching — Tags: , , , , , , — Jeff Fitzmyers @ 9:51 am

James Turk on King World News: During the most illiquid time of the trading day, somebody decided to take out all of the stops in silver… The important point Eric is that no technical damage was done and in fact the situation has become even more bullish because that little smack down overnight took out all of the weak hands… With this month’s important options expiry now behind us, I’m looking for higher prices next week. Even though the March/May spread has flattened a little, the backwardation continues to grow to 2015 and has ballooned further to $1.16. The short squeeze is continuing to develop. The shorts are trapped and whether the trap springs this week or in a month or two I don’t know, but we are getting very close.

2008 backwardation:

2011 backwardation: It seems at least twice as significant compared to the 2008 backwardation.

Again, IF the fractal is a repeat, possibly expect silver to rise to 40-46 $/oz over the next 20 trading days, if the LBMA 12 month SIFO does not make a new low. That’s only about $0.50 /day.

UPDATE March 3: I have some mistakes on the chart. This one is correct. The following 1 is not correct. A similar price rise for 2011 targets 38 $/oz.

Scotia Mocatta now only out of 100 oz bars.

February 24, 2011

Backwardation update for Feb 24: about the same as yesterday

Filed under: Just Watching — Tags: , , , , , , , , — Jeff Fitzmyers @ 9:09 pm

King World News interviewed Dave Madge director of sales at the Royal Canadian Mint. When asked if the RCM is having trouble acquiring silver Madge responded, “Demand right now for silver is through the roof and it shows no signs of slowing at this point. Sourcing silver is becoming very difficult. We are competing with a great many players when it comes to purchasing silver and many of these players are bidding the price higher… We are anticipating it to become even more difficult to secure supplies in the future. This is based on what we are seeing firsthand and what our suppliers are telling us.”

Scotia Mocatta was briefly out of 1, 10, 100 oz bars, a week ago. They have have been out of 1 kg bars for the past 6 days. The 100 oz bars are out of stock again.

Still a sizable $1.16/ oz difference between the front month and December 2015.

The LBMA is about the same as yesterday.

IF the fractal is a repeat, possibly expect silver to rise to 40-46 38 $/oz over the next 20 trading days, if the LBMA 12 month SIFO does not make a new low.

References:
+ Harvey Organ has today’s delivery and warehouse details.
+ Silver backwardation update for Feb 23 2011 and long term chart
+ SLW – long short term and long term calls -4%, +60%, +65%, -15%

February 7, 2011

Backwardation still going strong in COMEX and LBMA and rumors

Filed under: Just Watching — Tags: , , , , — Jeff Fitzmyers @ 7:42 am

Some have been speculating that precious metal demand has been using GLD and SLV to get metal.

The contact out of London has updated King World News on the massive Asian buyers which have been accumulating both gold and silver. “The Asians, particularly the Chinese, want physical gold and they want it tomorrow. So the Chinese have a new method. They are now planning to buy tremendous amounts of the ETF GLD. They will then tender the GLD shares for immediate delivery of the gold. This bypasses all of the rules of places such as the Comex limiting delivery. There is no limit as to how much you can buy from the ETF GLD.

Why did it take them so long?!? I really tend to doubt various “official” numbers, etc. But if this half true, things really might get exciting in a few weeks.

References
+ LBMA current statistics
+ Silver shortages and backwardation update
+ Long SLW and won’t trade out unless something significant arises

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