Hong Kong Metals Exchange Opens Silver Contract Friday

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bensgone
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Hong Kong Metals Exchange Opens Silver Contract Friday

GoldSilver.com (Silver Shield) – This is the news that I have been waiting for and is probably the reason why silver has been so strong the past couple of days. The HKME is starting its silver contract this Friday July 22nd! This officially breaks the Anglo American monopoly on silver. This will be the first time that Asians can buy and take future delivery of silver in Asia. No longer can the CME raise margins close to 100% in 8 days. (Then refuses to lower them despite a 30%+ drop in 5 days.) The extended hours should also stop the 10 am smack down since traders can now access the HKME.

The silver shorts should be fearing the hundreds of millions of Asians that will be entering this small market.

For the rest of the article click below, or copy and paste.

http://babybulltwits.wordpress.com/2011/07/20/hong-kong-metals-exchange-opens-silver-contract-friday/

Edited by admin on 11/08/2014 - 06:09
inchhigh
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Margins

Has anybody seen their performance bond numbers?  Their Gold Margins are a little lower that CME but I haven't seen anything on the new Silver contracts.

I_ate_the_crow
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HKMEx

I would be cautious about expectations of the HKMEx silver contract.

Remember, back in late April, when 10 Senators went to visit China to "discuss issues including clean energy, trade issues, currency, foreign policy and human rights" under the cover of the labor unrest brewing in China?

http://www.cbsnews.com/stories/2011/04/20/501364/main20055728.shtml

It seems a little too coincidental that, about three weeks later on May 8th, the SEC made the announcement that the HKMEx had been granted authority to trade a 32oz gold contract and eventually a silver contract.

http://www.zerohedge.com/article/hong-kong-mercantile-exchanges-1-kilo-gold-contract-end-comex-gold-futures-trading-and-bang-

On the HKMEx website http://www.hkmerc.com/en/index.html it states:

While gold futures trading on Asian exchanges has demonstrated significant growth, there is currently no contract that is or will likely become a regional benchmark contract for gold pricing. Without a regional benchmark, true price discovery for gold is either confined to the local in-country market or must depend on the European or North American markets.

The July 20th volume and open interest for the gold contract was around 3700 and 3000, respectively.

http://www.hkmerc.com/hkmex/report/daily_report/20110720_HKG_Daily_Volume_And_Open_Interest_Report.pdf

FalseParadigm
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I second that

I_ate_the_crow wrote:

I would be cautious about expectations of the HKMEx silver contract.

Remember, back in late April, when 10 Senators went to visit China to "discuss issues including clean energy, trade issues, currency, foreign policy and human rights" under the cover of the labor unrest brewing in China?

http://www.cbsnews.com/stories/2011/04/20/501364/main20055728.shtml

It seems a little too coincidental that, about three weeks later on May 8th, the SEC made the announcement that the HKMEx had been granted authority to trade a 32oz gold contract and eventually a silver contract.

http://www.zerohedge.com/article/hong-kong-mercantile-exchanges-1-kilo-gold-contract-end-comex-gold-futures-trading-and-bang-

On the HKMEx website http://www.hkmerc.com/en/index.html it states:

While gold futures trading on Asian exchanges has demonstrated significant growth, there is currently no contract that is or will likely become a regional benchmark contract for gold pricing. Without a regional benchmark, true price discovery for gold is either confined to the local in-country market or must depend on the European or North American markets.

The July 20th volume and open interest for the gold contract was around 3700 and 3000, respectively.

http://www.hkmerc.com/hkmex/report/daily_report/20110720_HKG_Daily_Volume_And_Open_Interest_Report.pdf

People are overly optimistic about the new silver contracts.  A few questions for you all.

1. Is it in China's best interest to prematurely inflate the prices of gold and silver?  Of course not.  They have been waiting patiently for every EE attack and have been BTFD aggresively.  The last thing they want is $2000 gold and $100 silver tomorrow.
2. Back in March when they announced the new gold contracts everyone did the same thing and said, "FINALLY!  THE ANGLO-AMERICAN DOMINANCE OVER PMS IS OVER!  GOLD IS GOING TO SKYROCKET!"  Didn't happen.  Gold rallied a mere $50ish and shortly after dropped to around $1480. 

I think this is simply a ploy by China to open up a physical buying market that THEY control.  They'll almost surely follow everything the CME group does.

Also, if you think about it, it makes total sense that China would do something like this.  If China were to buy up all the COMEX silver and demand physical delivery it would trigger a default that would allow silver (and gold) to achieve a true price discovery.

China simply is executing their strategy to safeguard itself from the US collapse and do its best to become the new superpower.
 

funthea
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I agree. I think China has a

I agree. I think China has a whole lot more buying they want to do before they will disrupt this apple cart.

They will wish to be well stocked before they will want any real price discovery to be had.

silverbleve
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T minus 4.5 hours until hkmex

T minus 4.5 hours until hkmex opens silver 1000 oz contracts. Can't wait to see what happens, I may be alone in this but I expect a rally as all the news has been digested and dust has had time to settle. Hoping the fresh blood is a good 50k contracts in volume.

crackor
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will sprott have an effect on silver?

Had to post this as I have not seen any reference to Jesses Cafe post.

Quote from Jesse

Surmise on my part, based on the facts at hand, but Mr. Sprott seems to have an interesting problem with his Physical Silver Trust. And that problem is indicative of a physical bullion market that is riddled with leverage and irredeemable paper, reminiscent of the Collateralized Debt Obligation and Credit Default Swaps markets, before their virtual default and meltdown.

Cash levels in his fund are rather low, down to about 2 million US dollars or so, which is not much cash on hand for a decent sized fund with a market cap of slightly over one billion US dollars. As a note, I have to extrapolate the cash on hand since PSLV does not release this figure, but they do put out the figures surrounding it. It could be as high as 4 million, which is still rather slim, and a testimony perhaps to their belief in the silver bull and low operating expenses.

But the question remains, with a premium to NAV of over 19%, and with strong demand in silver and their units, how do they respond to this need for additional cash reserves and units? 

The answer of course is a follow-on, a secondary offering, acquiring more silver and adding more units, and selling them into the public demand. 

Now that they have digested their follow on gold offering of several hundreds of millions of dollars, perhaps they can turn to the silver market again.

But here is the catch. Funds like Sprott don't do paper, to the extent that a listed company's equity might do. They just print more shares. 

Even supposed bullion offerings like SLV and GLD do paper chases almost every week. They do swaps for for virtual metal, for example, throwing IOUs on the pile that may or may not be good in a demand crunch for bullion, because they are tracking ETFs, and not closed end funds. They have to manage inventory to the fluctuations in almost real time.

What you see with PSLV and PHYS, and funds like them, is presumably what you get, and in these days of what appears to be a shell game in the silver market, that type of product commands a substantial premium if one has some chance of taking possession in something approaching a reasonable manner.

And in this market structure, no responsible fund manager would agree to do a follow on unless they were able to secure potential bullion inventory in advance at something approaching the market price, which today is around 39.60 per ounce, and have a reasonable plan to take delivery in the foreseeable future. I hear that their last purchase took THREE MONTHS for delivery. Three months or more is a significant period of time in today's volatile global markets. Three months puts us in the historically stormy seas of October, well beyond the known horizon these days.

The current deliverable inventory at the Comex, the single largest depository of tradeable, traceable silver in North American, stands around 27 million ounces, with total value of just over one billion dollars. Not much in today's world of billions flying about, even through individual accounts.

Can Mr. Sprott obtain about 1/5 of the 'visible float' in silver bullion without buying against himself in the market, that is, raising the prices he pays by the demand he himself presents, chasing his tail in the market as it were?

He might turn to the LBMA, the storied London Metals Exchange which is the locus of bullion trade. But with their secretive inventories that change hands in daily multiples of themselves, and purported 100:1 paper leverage, the problem remains the same. When you pull actual bullion out of that system, you start raising leverage, and risk, geometrically. 

Alas, the central banks do not have stores of silver which they can strategically sell into the market to satisfy demand and help their cronies in the bullion banks as they do with gold.

Doing a deal to satisfy demand in size is going to become increasingly difficult in such an imbalanced, poorly regulated market. A default tends to occurs at the core of the market, even while supply is available on the retail level, 'at the margins.' Until it is not. 

In other words, you will probably be able to buy a few coins locally the day before the wholesalers default on their obligations, there is a run on supply, and nothing is available as deliverable inventory is quickly pulled off the market, except at the most usurious prices. And of course the governments intervene to save, and probably somewhat selectively, the naked shorts from ruin. 

Ah, the problems of the successful entrepreneur in times of collapsing paper  and its associated delusions.

silverbleve
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t minus

1.5 hours.

jlee2027
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Price is down

Well, that's a letdown.

silverbleve
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:)

I know right? That was pretty much a non-event after all. What a letdown indeed.

FalseParadigm
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Yep

silverbleve wrote:

I know right? That was pretty much a non-event after all. What a letdown indeed.

We told you.

Ernie Pantusso
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I_ate_the_crow wrote: The

I_ate_the_crow wrote:

The July 20th volume and open interest for the gold contract was around 3700 and 3000, respectively.

Volume is important in order to assess the weight of an exchange, but for me it's even more interesting the ratio volume : delivered metal.

This is what could distinguish these asian exchanges from comex and london, and this is what make them so "dangerous"

Ernie Pantusso
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SeverinSlade wrote: People

SeverinSlade wrote:

People are overly optimistic about the new silver contracts.  A few questions for you all.

1. Is it in China's best interest to prematurely inflate the prices of gold and silver?  Of course not.  They have been waiting patiently for every EE attack and have been BTFD aggresively.  The last thing they want is $2000 gold and $100 silver tomorrow.

This is true for state controlled fonds. This argument explains why they won't buy pm massively as well as they didn't in the past.

But I'm not sure asian private investors seeing an opportunity now in investing in pm won't do it in order to not see inflated pm prices

flaunt
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Come on guys, did you really

Come on guys, did you really expect an immediate surge in COMEX silver based on a new exchange in China?  The volume was only 1140 contracts, and each contract is 1/5 the size of the COMEX contract.  So to have the same impact as COMEX, the average volume will have to get up to 5 times that of the COMEX.  Volume on Friday was around 60,000, so the HKME would have to be around 300,000 to equal the size of the COMEX.  It could happen, but it will take some time to ramp up like any other exchange.  It will be interesting to see if there are arbitrage opportunities between the two exchanges.  If so that would effectively link the price between the two exchanges and vastly increase the demand for immediate-delivery physical investment-grade bars depending on how well the HKME does.  For example, assume silver were trading at 40/oz on the COMEX and 41/oz on the HKME, and that you could reasonably quickly take delivery on COMEX and register it with HKME.  You could take delivery of one 5,000 oz contract on the COMEX, then sell five 1,000 oz contracts on the HKME against the same bullion for 41/oz.  The more people who get involved in the arbitrage trade, the closer the prices between the two exchanges.  That would be great because if this HKME is going to increase demand it would have a definite impact on COMEX contract prices which is unfortunately the price that most silver products track. 

I think we'll know relatively soon whether the ability to arbitrage is there or not.  If it's not, we'll see wide disparities between the two exchanges as volume ramps on the HKME.  I'm hoping the HKME and the COMEX will trade roughly at the same levels rather than just sucking volume out of the COMEX and onto the HKME.

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