Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Premiums Play a Role in Indicating Silver Manipulation

Commodities / Gold and Silver 2010 Apr 07, 2010 - 04:44 PM GMT

By: Dr_Jeff_Lewis

Commodities

Silver investors should remember to always pay attention to the per ounce premium they pay to receive physical metals.  While premiums are important as a barometer of the actual silver you're obtaining per dollar, premiums also play a very important role in gauging current market manipulation. 


Why Premiums Imply Manipulation

There is possibly no other commodity that is as fundamentally fungible as metals.  Unlike corn, soybeans, beef and pork bellies, metals are identical, whether they are produced in the breadbasket of America or in the slums of the third world.  Other natural commodities, like beef or corn bushels, can vary in quality, in taste and visual appeal.  Beef raised in the European Union, where cases of mad cow disease have been plenty, carries additional risk than beef cattle raised in America.  While the end product may be similar, they are not always as fungible as you might hear from an end user, or the consumer. 

With all that said, the smallest premiums should be found in commodities that are more identical from area to area, and a greater premium is paid for commodities that aren't so similar.  However, premiums work differently in the case of the commodities markets.  Pork bellies, which can vary greatly in quality, especially to the diner and butcher, are traded with thin premiums.  Silver, on the other hand, carries a larger premium over the marketplace despite being universally the same.

The Workings of the Silver Premium

It is true that much of the silver premium exists to protect the individual broker from the risk of a lower silver price between the time they buy silver rounds and the time they sell them.  In addition, the premium helps cover overhead costs, including storage, security and personnel to manage silver holdings.  However, these costs are also borne by investors through the futures markets in other commodities that are not as easy to store or manage as small one ounce rounds of silver.  So why is there such a big difference?

People Don't Trust the Futures Markets

Simply put, those who are buying silver as an investment are rather untrusting of the futures market to protect their wealth, and the premium implies that investors value having silver in their possession over having it in a vault thousands of miles away.  Having silver in your own hands assures that you are the actual owner, and that the money you paid to purchase the silver is actually represented by real, tangible metals.

Premiums Are on the Rise

Following allegations by a whistle blower that the futures markets are being manipulated by investment banks and brokers, premiums for physical metals have begun to rise, despite little changes in market volatility.  There is no better dataset to test this theory than the last few months of trading.  After falling from $17 in January to $15 in February and bouncing back to $17 in March, premiums in March and January should be similar.  Of course, they are not. 

As the CTFC probes into the allegations, silver investors once satisfied with paper ownership are now demanding physicals, and as a result, the price of silver traded off the markets is rising.  Many silver rounds are now selling for a full $1.19 over spot, far greater than the price of $.79 over spot in January.  For this spread to grow shows only one fact: the silver markets are being manipulated on the market, and investors are taking notice in mass. 

By Dr. Jeff Lewis

Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com

Copyright © 2010 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in