Buying gold & silver?

i remember (when i first thought of buying gold) back in 2005, the idea of a $100 dollar move in the gold price in a single day would be the sign of the impending apocalypse, and yet here we are.
Gold over $5000 and silver anywhere near to $100 was an insane fantasy that would have got you laughed out of any forum.
 
Different times, 2005 was just about the end of the 20-25 year bear/sideways market for gold. Back then it wasn't in fashion and in 2005 $100 moves in a single day would be about 25% moves in price, $100 today is not the same. Although the price movement today is still pretty extreme IMO!
 
Silver spot price on the Shanghai market is $123 an oz for physical unit, so still some way before it catches up on the eastern market. How much of what is being sold now in the west, is paper vs an actual unit?
 
I'm unclear why there can be two markets with such a discrepancy in pricing. Surely, if you operated in those financial circles, you'd buy your physical silver on one market and sell it on another for an immediate profit ?

currently up about 7%
 
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tangey said:
I'm unclear why there can be two markets with such a discrepancy in pricing. Surely, if you operated in those financial circles, you'd buy your physical silver on one market and sell it on another for an immediate profit ?

currently up about 7%
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The silver market in Shanghai is a physical market. The Comex exchange in the West is a paper market. Normally a price difference in physical markets would be arbitraged away, by people sending silver on a plane to where the price is higher, to profit. The fact that there is a growing price discrepancy between East and West is indicative of physical delivery problems in the Western market, i.e. paper is overstating the amount of physical silver available for delivery.
 
radderfire said:
The silver market in Shanghai is a physical market. The Comex exchange in the West is a paper market. Normally a price difference in physical markets would be arbitraged away, by people sending silver on a plane to where the price is higher, to profit. The fact that there is a growing price discrepancy between East and West is indicative of physical delivery problems in the Western market, i.e. paper is overstating the amount of physical silver available for delivery.
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Thanks, wasn't aware.

So there are no silver ETF/ETC or equivalent instruments operating on the Shanghai market , its physical silver only ?
 
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tangey said:
Thanks, wasn't aware.

So there are no silver ETF/ETC or equivalent instruments operating on the Shanghai market , its physical silver only ?
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We aren't talking about ETF/ETCs here. The Shanghai silver market is a proper physical metals market. The COMEX exchange in the West is a paper futures market. You can "stand for delivery" on a futures contract and take delivery of physical metal although traditionally this has not been common and I believe discouraged. However, I think people have started to stand for delivery recently. There have been experts saying that the COMEX acts as a price suppression mechanism for physical gold and silver for years. This suppression mechanism may now be unravelling now that physical silver is in short supply.
 
radderfire said:
The silver market in Shanghai is a physical market. The Comex exchange in the West is a paper market. Normally a price difference in physical markets would be arbitraged away, by people sending silver on a plane to where the price is higher, to profit. The fact that there is a growing price discrepancy between East and West is indicative of physical delivery problems in the Western market, i.e. paper is overstating the amount of physical silver available for delivery.
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Nah, the issue is that there are structural difficulties with arbitrage - capital controls, import rules etc.

Comex contracts can be physically delivered at settlement if the buyer wishes.
 
dowie said:
Nah, the issue is that there are structural difficulties with arbitrage - capital controls, import rules etc.

Comex contracts can be physically delivered at settlement if the buyer wishes.
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My understanding is that monetary metals like silver can and do get airfreighted around the world, in which case physical arbitrage is possible.

I think there are clauses in Comex contracts which will allow them to be cash settled even if the buyer wanted physical. This means they cannot be relied upon for physical delivery.

A recent development is that China has now banned the export of silver, so it may be the case that arbitrage can't happen from East to West, although this is irrelevant as the East price is highest.
 
radderfire said:
My understanding is that monetary metals like silver can and do get airfreighted around the world, in which case physical arbitrage is possible.
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I'm not saying it's not possible for some arbitrage but if not for structural issues then significant price discrepancies should be largely arbed away.

radderfire said:
I think there are clauses in Comex contracts which will allow them to be cash settled even if the buyer wanted physical. This means they cannot be relied upon for physical delivery.
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Not for the seller AFAIK - you may be thinking of some emergency provision for the exchange to make use of but AFAIK they've not been invoked and the sort of situation where that might be invoked is where you've already got some serious issue in the underlying physical market.
 
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dowie said:
I'm not saying it's not possible for some arbitrage but if not for structural issues then significant price discrepancies should be largely arbed away.

Not for the seller AFAIK - you may be thinking of some emergency provision for the exchange to make use of but AFAIK they've not been invoked and the sort of situation where that might be invoked is where you've already got some serious issue in the underlying physical market.
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My view is that up to now, price discrepancies could be and were arbed away. The fact that a discrepancy is arising now is a structural issue, i.e. that the COMEX market may as a whole fail to deliver.

Yes probably not for the seller and I am thinking of the COMEX exchange itself, i.e. it has a fallback where if physical silver runs out, it can order contracts to be settled in cash, i.e. protecting itself.
 
radderfire said:
The fact that a discrepancy is arising now is a structural issue, i.e. that the COMEX market may as a whole fail to deliver.
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No, the structural issues are the issues with trading in China and arbing between the two markets not any inherent issues with COMEX.

For example if it was a COMEX issue then why not a similar discrepancy between COMEX settlement prices and the London bullion market? There isn't the same sort of issues with a spread between the markets persisting in that way because those markets can be tightly arbed, so it's not a COMEX issue, it's a China issue.
 
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dowie said:
No, the structural issues are the issues with trading in China and arbing between the two markets not any inherent issues with COMEX.

For example if it was a COMEX issue then why not a similar discrepancy between COMEX settlement prices and the London bullion market? There isn't the same sort of issues with a spread between the markets persisting in that way because those markets can be tightly arbed, so it's not a COMEX issue, it's a China issue.
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So if it was a China issue, how come it has only become an issue now, and has not been an issue until now?

In what way is China preventing the import of silver? It has just blocked the export of silver, so why would it want to block the import?

The reason why there's no arb opportunity between COMEX and the LBMA is that it will be the same big banks that are participants in these markets, and the markets will be performing similar functions for them, i.e. suppressing the price of bullion metals. On the Shanghai market, there are industrial buyers that actually want physical silver. The premium between Shanghai and COMEX is showing that Shanghai is prepared to pay more for physical metal than the price of a paper promise of the delivery of the metal.
 
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