EP silver thoughts corner

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Ernie Pantusso
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EP silver thoughts corner

Just collecting disparate thoughts about the silver market

Edited by admin on 11/08/2014 - 06:09
Ernie Pantusso
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India's silver imports

India's silver imports 2010 = 1200 tons

http://in.reuters.com/article/2010/12/07/idINIndia-53400220101207

"Last week, India’s state-owned trading company—Minerals and Metals Trading Corporation (MMTC)—said that it would import ... 1,200 tons of Silver in 2011-12 as demand for the precious metals is rising fast."

http://www.commodityonline.com/news/India-import-of-gold-silver-to-soar-in-2011-40694-3-1.html

So, mmtc will import in 2011-12 as much silver as the whole India has imported in 2010.

I couldn't find what are the expectations about India's 2011 global import.

What I don't understand is the last statement of the col article "Every year, India buys more than 4,000 tonnes of silver."

 

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Sprott Physical Gold Trust follow-on offering

"The gross proceeds from the Offering will be US$311,255,340 (US$340,692,990 if the underwriters exercise in full the over-allotment option)."

http://harveyorgan.blogspot.com/

The same move applied to pslv would take at current prices ca. 8.5 Moz out of the silver market.

Just saying

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History of India and China Silver Holdings

I was looking at the WGC release about the world official gold holdings, and I thought to google for the world official silver holdings. Found nothing. But an interesting article of Doug Casey.

History of India and China Silver Holdings

In 2002, India was reported to have more silver bullion in its reserves than any other country who reports this statistic.  The number was reported at 87 million ounces of silver.  At the beginning of 2005, their reserves had already been depleted to 67.5 million ounces.  In 2005 they sold another 39 million ounces, putting their last recorded silver reserves at 28.5 million ounces.  In 5 years time, India’s silver reserves were cut by more than 2/3.

At the turn of the century, the largest unknown government silver reserves, was likely held by China, whose currency was the last in the world to be backed by silver. In its usual inscrutable way, the Chinese government has not revealed the extent of its holdings, but we know that it has been a big seller over the past few years, almost certainly helping to keep a lid on the price. China’s sales of their silver stock has fallen slightly over the past 2 years, but India has definitely picked up where China left off.

Let’s look at a brief timeline of silver sales between China and India over the past 5 years.  In 2001 China sold in excess of 50 million ounces of silver.  The following year they sold another 35 million ounces on the open market.  That puts an approximate two year total of bullion sales for China at 85 million ounces.  Remember that in 2002 India had the highest amount of know silver in its reserves at 87 million ounces.  China nearly matched that total in two years of sales!

It became quite clear that China would not be able to keep this up.  The Silver Institute reports, “Net sales (of silver) declined 30% year-on-year in 2004,” they go on to say, “The fall in government silver sales was almost exclusively driven by the amount of silver released from Chinese official stock…the country’s stockpiles have been markedly rundown.”

As a quick side note I feel it’s important to note that this decline in Chinese sales correlated exactly with the price of silver jumping to $8.29.

2005 came around and it marked, for the first time since 1998, that China did not lead the world in government sales of silver.  It is obvious that they were unable to keep up the pace of their sales due to dwindling stock piles.

This is where India comes in to pick up where China left off.  The problem is that they don’t have the stock piles to match the huge amount of sales that we saw from China in 2000-2003.  From 2002-2005 India’s silver reserves had declined from 87 million ounces to 67.5 million ounces.  In 2005 India outpaced China, for the first time, with their sales of silver amounting to 39 million ounces, leaving their silver reserves at 28.5 million ounces

It’s obvious that India would not be able to keep pace with China’s previous sales, being that China’s two-year sales from 2001-2002 nearly matched India’s total reserves of the time.  What was the result of the world’s governments ability to match supply shortfalls due to dwindling stock piles.  Another surge in the price of silver, but this time to 9.22 and higher

China and India are perfect examples of how countries with very large holdings of silver stock piles cannot maintain high enough levels of sales over an extended period of time to meet production shortfalls.

http://dailyreckoning.com/silver-stocks/

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Great article Ernie on the

Great article Ernie on the history of Indian/Chinese silver sales.  And before the Chinese and the Indians were dumping silver into the world markets it was other countries such as the US or South American producers.  And people wonder why there are few primary silver producers today compared with gold producers; there were virtually none before 2003 and the ones that did exist were perennially money losers - how could you possibly compete with all that silver coming onto the market?

So the lesson is, for the most part of the last century, stock markets, funds, institutions, advisors, analysts weren't aware that a profitable silver company could exist - hence the lagging of most of our silver stocks in relation to the price of silver - and silver is headed to triple digits.  I don't know where else l'd be putting my money apart from physical and maybe a few calls.

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mrgneiss wrote: how could you

mrgneiss wrote:
how could you possibly compete with all that silver coming onto the market?

how could you possibly compete with all that silver coming onto the market from public hands?

They weren't private investors selling their metal out of a negative view about it. They were governments selling this public property at stupid prices.

Today we tend to commend Indias and Chinas governments because they act PM friendly, but as far as silver is concerned they behaved at the same level as goldfinger Brown just a couple of years ago

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1933 silver confiscation

I thought that Roosevelts confiscation concerned only gold.

I was wrong. Thanx Jeff Nielson

151 - Executive Order 6814 - Requiring the Delivery of All Silver to the United States for Coinage

By virtue of the authority vested in me by the Silver Purchase Act of 1934 and of all other authority vested in me, I, Franklin D. Roosevelt, President of the United States of America, do hereby require the delivery of all silver situated in the continental United States on the effective date hereof, by any and all persons owning, possessing, or controlling any such silver, and do hereby require any and all persons owning, possessing, or controlling any such silver to deliver the same in the manner, upon the conditions and subject to the exceptions herein contained, such action being in my judgment necessary to effectuate the policy of the Silver Purchase Act of 1934. . . .

http://www.presidency.ucsb.edu/ws/index.php?pid=14741#axzz1RFxB8y7n

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???

This is over me ...

SECTION 4. Amount returnable for silver..–

The silver herein required to be delivered shall be coined into standard silver dollars, or otherwise added to the monetary stocks of the United States in accordance with the proclamation, bearing the same date as this order, relating to the coinage of silver, and there shall be returned therefor in standard silver dollars, silver certificates, or any other coin or currency of the United States, the monetary value of the silver so delivered (that is, $1.2929+ a fine troy ounce), less a deduction of 61 8/25 percent thereof for seigniorage, brassage, coinage, and other mint charges, as provided in such proclamation;

that is, the amount returnable for the silver delivered in accordance herewith shall be an amount equal to 50+ .– a fine troy ounce, which amount is not less than the fair value, at the time of this order, of the silver required to be delivered hereunder as determined by the market price over a reasonable period terminating at the time of this order.

 
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Hkmex - comex

From the homepage of the HKMEX (thanks Turdle GG):

"Settlement Method: Physical settlement".

Cash settlements are not allowed.

"Spot Month Position Limit: 3,000 contracts (gross long or short); the spot month position limit shall be effective from the close of the first business day of the contract month."

You can go short/long for no more than 3Moz. What a difference with the comex!

"Delivery Period: Four consecutive Hong Kong business days following the last trading day."

At comex you have the whole month to deliver.

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HKMEX

"Depository: VIA MAT International (HK) Ltd."

http://www.hkmerc.com/en/products/HKS#A3

I wonder if there is something like a registered category like at comex.

They should have anyway some metal in case a seller is unable to deliver. My understanding is that this is the main reason of the comex registered category.

The most interesting question for me is which percentage of the longs will ask for delivery at the end of every month. At the comex they are a minor figure.

At HK, with 1 contract being only 1k oz (ca. 40.000 $ today) , little investors too, with a main interest in physical, will be involved.

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Bron Suchecki - GoldChat

Bron Suchecki - GoldChat

The new Pan Asian Gold Exchange (PAGE) has got Andrew Maguire into hyper mode claiming that it "will ultimately destroy the remaining short positions in both gold and silver" and "in very short order affect current precious metals price discovery dynamics." This all based on his wishful thinking that "if just 1% of their [Agricultural Bank of China] customers bought a single 10 ounce contract, that would equate to 1,000 tons of physical gold being drawn down."

As Kid Dynamite comments in a FT Alphaville article on Maguire "a 10 ounce contract is worth well more than the average annual income in China, right? There was a stat recently that 40% of Americans couldn't come up with $2k if they needed it for emergency bills... I wonder what % of Chinese can afford to buy 10 ounces worth of gold?"

I tend to agree.

http://www.24hgold.com/english/news-gold-silver-pan-asian-gold-exchange-hype.aspx?contributor=Bron+Suchecki&article=3568230082G10020&redirect=False

Lets see:

"As at 31 December 2010, the Bank had total assets of RMB10,337,406 million, deposits of RMB 8,887,905 million and loans of RMB4,956,741 million." (http://www.abchina.com/en/about-us/about-abc/Overview/)

8,900,000 m yuan = 1,400,000 m $ (1$ = 6,5 yuan) = 1,400 billions $

1% of $ 1,400 billions = $ 14 billions

So, if 1 % of the total deposits of the Agricultural Bank of China goes into this new silver market how many silver oz can get bought with that amount?

Andrew Maguire yes

Bron Suchecki no

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Maybe 1% of the deposits

Maybe 1% of the deposits going invested in pm is wishful thinking.

Ok. Lets say 0,1 %.

One one-thausandth of all deposits of the Agricultural Bank of China ($ 1,4 billions) going invested in pm.

I don't think this is whishful thinking.

Now, lets the half of this amount be invested in silver, $ 700 mil.

That would buy 17.5 Moz at the current price.

Would it "destroy the shorts", as Maguire says? I don't know. But if a substantial part of it should go to into buying physical silver, it could for sure destabilize the physical market

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Hugo Salinas Price Mexico monetizing silver

When asked about how this central bank purchase might influence his proposal to monetize silver Mr. Price remarked, “I think that maybe the central bank would not look upon our proposal with such a jaundiced eye.  I mean if they bought gold maybe it would not be unreasonable to hope that they would see the monetization of a silver ounce as a good thing for the country. 

I can’t help telling you that we have very strong support in the Congress for the monetization of silver, very strong support.  Congress is not in session now and will not be back in session until September, but I have high hopes that when both the upper and the lower Houses reconvene in September that we will see something very good happen.”

When asked if the monetization of silver in Mexico could happen in one, two or three years Hugo Salinas Price replied, “I think it could happen sooner than that, I think that it might happen this year.  Things are looking good.  Of course I have been saying this for some time, but now I am saying it with more emphasis...The idea is now firmly entrenched and it’s only a matter of time before we see some action.”

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/5/16_Hugo_Salinas_Price_-_QE_in_US_Will_Lead_to_Utter_Destruction.html

But how much metal would this process require?

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Turdle gg and Butler about slv shorting

Some time back Turdle GG reported an interesting exchange with Ted Butler about slv shorting.

turdle wrote:

Let’s say there are 5 SLV shares outstanding.  And there are five shareholders holding a share each.  Let’s call them A, B, C, D and E.

A speculator (X) wants to bet on a decline in silver price, and decides to do so by short selling a share, with the hope of buying it back at a lower price and profiting from the downward move during the time between selling and buying.

First, and most important, X must “borrow” a share.  Let’s say that shareholder A is willing to “lend” its share. 

 A is transferring the title to the share to X.  A is not lending the share to X.  A is transferring the share to X. 

The short seller has not created two beneficial owners of the same share.  There are still only 5 shares. 

When a security is loaned, the title of the security transfers to the borrower.

Butler: "Thanks for your note. Yes, I do disagree, but most respectfully. Shareholder A has lent his shares (often times unknowingly), but not sold them. Effectively, this has created more shares than have been authorized and both shareholders A and Y own shares. As a result, there are brokerage statements reflecting 6 shares being owned."

turdle wrote:

I'm glad you see the distinction between "effectively" creating a new share and actually creating a new share.  However, I'm surprised that you still state that both A and Y own shares, when they clearly, legally, do not. 

Butler: "A quick question for you (based upon what you wrote previously). Has any lender, to your knowledge, ever "lost" his shares as a result of lending them to a short seller and not gotten ownership back?"

At that time I couldn't decide who was right.

My understanding now is, that Turdle, who most interestingly says to be an ex-lawyer, is interested in the legal issue: how many owners at the end? Who is legally entitled with the metal?

Butler is interested instead in the practical level: there are 5 bars but at the end of slv shorting process there are 6 people who are convinced they possess a bar each. This is, according to Butler, what makes slv shorting deceiving. Under this point of view (I guess this is what turdle didn't realize) the legal issue about who is entitled with the bars doesn't matter.

So, at the end I believe both Butler and turdle gg are right: turdle is right on the legal level, Butler is right on the economical level

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