Curious What You All Think About The Price Of Silver.

Naked shorts on COMEX.

You're right about the shady crap. I stay well away from stock markets. Remember the "short selling" that Volkswagen burnt their fingers with? It's the law of the jungle. Makers need regulation cos they're incapable of regulating themselves. Remember the film "The Big Short", or the South Sea Bubble back in the 1700's? But now I'm digressing from numismatics. Tut tut!

"It takes a couple years just to overcome the buying commission."
-thq

This should always be considered with investing. RE is 6% + all the maintenance, stock transactions today are basically free, collectibles can be as high as 30%. What helps in a small way is buying with credit cards. Sometimes I get as much as $75 back on a 1 oz bullion coin.

Nothing wrong with naked shorts. They are common in all markets. And are regulated by margin requirements.

"The house investment did better."
-sel_69l

And it keeps the rain off of you! Not many of us would put house type money into gold.

"I had to look up naked short selling and am perplexed at how that is even legal. Selling something you don't actually have? Sometimes selling more of something than the total that exists? Crazy."

-kbbpll


Hope this helps.

I buy Apple stock.  I am long.  I can pay cash and hold onto it as long as I please.  It goes up,  I can sell for a profit, it goes down,  I sell for a loss.  I can buy on margin, where I put up half and the brokerage firm puts up half.  I can hold on as long as I like as long as I keep paying interest on my margin loan and the stock never goes down too much.  If it goes down too far, then I get the "margin call" from the broker to either liquidate or put up more money.

I think Apple is too high and Android will put them out of business.  I short Apple stock.  I sell Apple stock I don't own.  The broker borrows the stock from another house account and delivers that stock to whoever I sold it to.  My account now has a short position.  I have to put up half the cash value to hold my position.  (No interest costs since the brokerage firm has both the proceeds of the sale and my margin to MAKE interest on). I am obligated at some point in time to deliver the Apple stock I sold, i.e. cover my short.  I can hold on to my short as long as I like but if Apple goes up a lot, the broker will issue me a "margin call" and I must either buy in and cover or put up more money to continue to hold my short.  This is where the term "short squeeze" comes from.  If prices suddenly jump, it becomes painful for the shorts and they must buy to cover, which results in even higher prices.

Rooting for something to go down is definitely for the minority.  Humans by nature prefer rooting for something to go up.

In commodity markets:
An end user of silver, let's say Tiffanys, wants to be sure it has a supply of silver for its next production run scheduled for June 2024.  They check the futures price for June delivery, calculate its cost of production, transport, advertising, etc. and determine that at that price they can make X% profit. So they buy or go long, a contract for June 2024 delivery.  To hold this position, Tiffany does put up a certain percentage of the contract value.  Actual users as well as producers probably have less margin requirements than speculators.  Tiffanys doesn't particularly care what silver prices do from then on. 
 
The guy digging up the silver, i.e. Hecla Mining, is busy digging today and figures to have enough silver to deliver come June 2024.  They check the futures price for June 2024 and calculate at that price they can make a profit.  They sell a contract for June delivery.  Is it a naked short?  Technically it might be naked but they have a steady stream of production and most likely other reserves. Hecla doesn't particularly care what prices do as they are happy with what they sold it at.  Let's say in June silver prices are substantially higher.  Hecla is a little bit sad it missed out on some additional profit but of course this is no way to run a business.  Hecla could decide to buy the June contract back at a loss, but it's just mined silver is worth more by the same amount, so it is a wash.  Just like for Tiffany, it could ditch its June production run, sell the June contract for a profit, and that profit is used to offset the cost of buying silver at the now higher prices.

Commodity markets are not liquid enough with just producers and users buying and selling contracts and that's where speculators come in.  Naked shorts don't have any actual commodity to deliver so their margin requirements are much higher.  There is no willy nilly naked shorting.

@kbbpll.... Naked Shorting is illegal.

"But there can be more shorting than what is available:

Person A has a bar of silver.
Person B wants to short it. Therefore, B borrows it from A and sells it to C.
Person C now has the bar."

None of this happens on the regulated exchanges. Standard contract size is for 5000 ounces and I repeat, no one can buy or sell willy nilly.

What you describe most certainly has happened in the past with small shady outfits, particularly in frothy bull markets. But it is not in the millions of bars.

As you suggest, NEVER leave your precious metals at some small mom and pop business. The scenario you suggest happens all too often. They collect your cash, tell you a bar is in your account, and all is good until the music stops and it is all gone.

If you do have odd ball bars, just bury them in your backyard. If ebay is any indication, old vintage silver bars have substantial premium over spot.

Just read a bit on this MF global fiasco and this is my brief impression.

MF Global, was the largest broker at many of the world's commodity exchanges.
In 2008 they had a rogue employee trader that cost them $150 mil.
In 2010 MF Global made a massive $8 billion bet on distressed European debt and lost.
Word leaked and there was a run on assets.
They took customer funds to meet regulatory requirements, but too little too late.

What does this have to do with silver and the commodity markets?

Are you suggesting there is systemic cheating in silver commodity trading and we should just skip it altogether?

I instigating a discussion about naked shorting but nobody answered my question. What happened in 2010-2011? Maybe nobody knows, or it has no specific answer. The price tripled in 9 months then crashed, and the spike is very similar to the 1979 Hunt brothers thing. All I found was something about the debt ceiling and turmoil in the Middle Easst, which seem like wild guesses to me.