When Physical diverges from Paper

[SilverStackerMember]

I have heard many times that at some point Physical Silver will break away from Paper Silver.  Can someone take the time and explain how this will actually happen and the mechanics behind it?  Any info would be appreciated.  Thanks.

[OrionMember]

The premium over paper spot has been increasing vastly lately. That is a possibility for divergence of what a SLV would cost compared to a real Silver Ounce.

 

I think that has already started happening but the true rush and divergence will come when people lose the good faith of fiat money all across the world as every central bank is devaluing their currency currently. This wasn’t reported much but of every pre-2012 U.S. Presidential poll on topics that concern americans, inflation was the number one answer every time with usually around 70-80% picking it as #1 issue we face, rising prices. Not once was inflation mentioned or the Fed in any of the presidential debates. Countries want their gold back, countries devaluing their currency by half over night, price controls, currency wars, trade wars, threats of hot wars in Asia…..

 

In my opinion the snowball is quickly becoming an avalanche and if you are just now starting to prep or stack you better make hay while the sun is shining.

[SilverStackerMember]

So are you saying that the premium for physical will continue to go higher and the paper premium will grow smaller until people find out that they really don’t own (rehypothecated) silver at all in an ETF or such.  At that time there will be a big paper sell off and a rush to physical.  Is that how it will play out?  Any educated guesses are appreciated.  It would be nice to be able to see it when it comes so putting it into a real world scenario helps.

[OrionMember]

If the crash takes on a more slow burn 2010-2012 decline then yes the premium will diverge further because silver isn’t adding a single ounce to supply because of so much demand industrially and now with such a huge surge as an investment or inflation guard.

 

My bets are placed on the fact that an event will happen that will reveal how completely misguided central bank action has been and just how completely broke the world is and we will see a fiat currency crisis as people run towards the exits for hard assets.

 

If I were Eric Sprott I would be pushing for a failure to deliver notice.

 

[cordobaMember]

I see how industry and investors are now buying up silver in huge quantities. The richer investors appear to be stepping in now: names such as HSBC, JP Morgan, Volkswagen, the Bank of China, are now making huge purchases. It looks as though there will be monster purchases of this type because the price of physical, tied to the SLV, is so depressed. There are already shortages being reported at coin shops and online dealers… and yet the spot price keeps declining. What is the most likely catalyst for the physical price to separate from the paper price: the point where SLV investors register these shortages and make a concerted call on their silver ‘holdings’ or will it take a broader event, such as an escalation of competitive devaluations?

[MammothMember]

“What is the most likely catalyst for the physical price to separate from the paper price”

When the Main Stream media (MSM) starts reporting that there is a shortage of physical metal, all the sheep will suddenly rush in and drive the price up parabolically.

And neither Jim Sinclair, nor ANYBODY ELSE is able to predict when this will happen.

[SilverStackerMember]

Eric Sprott seems to be a favorite son for silver enthusiasts.  I was curious though as many also say that “paper silver” will break away from “physical silver”.  I would bet that Eric Sprott doesn’t think that his fund (PSLV) will be lumped in with SLV.  So I guess I’m just trying to reconcile the two.  I know PHYS is best but I do own some PSLV.  Any thoughts.

[SilverDaggerMember]

I buy and sell on Ebay the  world’s largest and the sudden drops has little  or no effect at all ,just try buying a 1986-  2013 ASE for  $28.00 If you can it’s only because people like me Missed it!

[silverrrrrMember]

Supply and demand is most commonly the catalyst for a divergence in the price of, in this case, silver.  Reasons:  Silver is mined as a by-product of zinc, copper, etc.  Yes, there are a few silver mines, but just a hand ful on Earth.  The cost of mining silver is expensive.  Silver is CONSUMED (in electronics, solar, even clothes).  Most silver ends up in land fills, yet, because of its miniscule amounts used, foraging in land fills is not a profitable endeavor.

Unlike gold with is available, and has little value outside its obvious metal value, gold is not consumed.

The premium, in the near future, will be at least half of the paper price of silver.  In other words, a 30. paper price will actually be a physical price of 45.  And I say it will be AT LEAST that.  Remember, when you cannot find it, holders will be asking the moon…and there will be those willing to pay it.

Buy silver now at any price that you can find it.  You will be glad you did!

 

[mikeyj80Member]

Paper and physical are tied at the hip, remember that. The paper is represented by 1000oz bars. If you sell a paper, also called futures contract, you are making a promise to deliver five 1000oz bars to the buyer of the contract, at a certain place (ny warehouse) and a certain time (whatever the expiration date of the contract traded).

The supply of 1000oz bars is at ten year highs right now, and I see few who acknowledge that the abundant supply of the physical metal that backs up the paper trade, may actually have something to do with the slump in prices.

I as some here suggest that mining dries up, you will see paper price skyrocket as well, I would imagine premiums would actually shrink if silver went back to $50 or beyond as you will tend to find more sellers than buyers at higher prices.

If you have the capital, COMEX is creating a 1000 oz physical delivery contract, meaning you can buy the paper, not sell the paper, and the person on the other side will provide you 1000 oz in a warehouse in NY that you can arrange to pickup. This starts in June with first expiration in September.

People who say paper does not equal physical are right in the sense that today they are not the same, but you can very easily convert your paper to physical as described above.

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