Edit: I was reminded silver hit $50 twice without the COMEX “breaking”
Woke up today to see 18k taken off the board yesterday.
You see nearly a billion ounces of paper traded yesterday, or just a year’s worth of mine supply.
About my writing – I didn’t think this was about “breaking” the COMEX. Sure, could that have happened? Possibly. Could it still? Yeah. What these numbers are telling me is that there were a lot of paper hands that washed out with that spoof yesterday to wash out the options holders over $28.
That being said – this movement was about constriction. Think of the boa just squeezing ever so tighter. It moves slowly…until it doesn’t. Many are frustrated by the price. I can tell you, it seems there’s a lot moving behind the scenes that isn’t immediately reflected in a major price bump. David Smith was on Arcadia yesterday, and he and others seem to have a sort of confidence that things are indeed in motion.
When you look at December futures, Craig Hemke reported that December was 9337 contracts and September was 10548. This is under the numbers I have been reporting. With yesterday knocking it down to 28k contracts, in all likelihood they could do hulk smashed at 8am today again to wash out another 18,000. This takes you to 10,000 contracts. About on par for September and December.
So it wasn’t 400m oz on day one? No, but let me report some of the mechanics going on here. Lots of variables
- Unlike Sept and Dec, 1,000 oz bar premiums have been reported by David Morgan at $1.00-$1.40 over spot. This shows extreme tightness in the metals.
- Unlike in Sept and Dec, ETFs at the LBMA in London are just about out of metals.
- Sprott’s PSLV continues to suck up all available bars from the market – potentially starving out industrial users. This may force the bid price higher. The PSLV is taking almost the equivalent of world mine supply production daily into its coffers.
- In December, they smashed price $3 before the delivery month. They tried a hard smash here several times, yet we are $.30 or so from the top. Large long positions have held the line.
- In March, Andrew Maguire reports many banks are going to have to start to “square the books” for June 28th Basel 3 implementation. I have differing sources on this, but the latest info provided by a reader points us to here for the Fed and here for the LBMA (thanks Dave!). The BIS page may say 2022, but it appears these entities are continuing on. I have sent open questions regarding Basel 3 and silver – and hoping they get answered on Andrew’s AMA on Wallstreetsilver. Andrew reports that with these changes, one could expect to see $40 silver.
- 10 yr is MASSIVELY higher than in December, which has created some headwinds for the price. It’s very possible any day now a form of Yield Curve Control is mentioned. This is where you got the electric price movement of about $10 in silver in a few weeks. And this can happen again.
Then – I reported that in September, they completed deliveries the second to last day of the month and in December, it was the LAST day of the delivery month. For 9300 contracts they couldn’t fulfill until the last day?
What I reported during this, was that the first few days, they took 20-30m off the shelves and handed over. Then, it appeared the rest of the silver was attempted to be sourced on the open spot market the rest of the month.
This showed the flush down heading into the month, with the large spike up on day 1 of the Dec deliveries. I am expecting volatility today, but I will be buying some options on AG later today expecting a sharp move up the next few weeks.
At the same time, the registered amount of silver the last few days went from 147m to 134m.
People point to this and say, “look, PLENTY of silver!!”
That silver is like the window display. They have it there so they can short against it, but they don’t actually want to hand it over. I covered this a few times, but essentially that was meant to protect their bonds – according to Seeking Alpha.
So – did I secretly want to see a 200m oz delivery month? YES! Could that still happen in May? YES!
The point is, the constriction is continuing. And here’s the next phase….
Phase 3 – industrial users start to realize supply is ultra tight and make larger orders. I expect this soon. It might be happening now. This video with Arcadia shows how the lease rates of silver have significantly increased. This may have been a short term emergency use for some industrials, but if this pops off the charts, it’s too late to act.
Phase 4 I believe is second half of March, when the mad scramble starts to happen for any bar in any corner of a vault. COULD THIS BE DELAYED UNTIL MAY??? Possibly. I don’t see it, but I also have never made a million ounce order for Toyota to gauge the market. I have heard outflows from SLV have continued – which may be being used right now by the major shareholders to take what they own off in a bank run on SLV.
To conclude – while this may not the be 400m oz death knell that many calling for break the comex would want – I believe any amount they need to go into the spot market for after the first few days will start to put a LOT of upward pressure on the price.
Watch price the first 2 weeks of this delivery. If this is a 50m oz month, and they deliver 20m oz the first few days, that’s 30m oz they need to get in the spot market. And they will be competing against PSLV, hedge funds, servicing those taking same day futures delivery, and industrial users.
What I would watch????
The weakest of those 8 big shorts. Maybe the weakest is short 15m. If price starts to creep over $32…$33….I feel the weakest link may break from the pack and put in an order that is massive to cover. This could take price up $3-6 in a single trading session and then it is a race between the last 7 to clear their short positions.
I still think the end of March will be spectacular. It’s just not going to come at the behest of a 200m oz COMEX month. Could 10k do the trick? Sure!!
All this means to me is I’m keeping my SLV calls for March but if price is smashed at 8AM, I’ll be looking for cheap May SLV calls way OTM as well.