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.
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.
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.
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.
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?
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.
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!
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.
" This is just my opinion
I no longer hold or buy any generic rounds or bars. I use to, it`s pretty much all that was available in quantity, back in the day. I`m not trying to agitate anyone, but all I buy and hold is U.S. Minted items. I have traded all my generic stuff for ASE`s and ... "Reply To: Limited Budget.
" Funny, I have the same issues; this site is a big pig. Locks up Firefox with some tables in the background for about 10 seconds on initial load. I have to use IE to have an almost decent experience. "Reply To: Leaving the Site – Data Vampire
" Hi Starlifter and welcome!
I'm like you, limited budget for PM's. No gold in my holdings but my silver is coming along decently. I get whatever I can, be it an ounce or 5 (I don't go larger than 5 oz bars). One thing I do to really stretch my silver budget is 90% coins. Get a dim... "Reply To: Limited Budget.
Yes, I know getting on the DOW now would be suicide that's why I'm keeping it in cash only. I figure if the DOW comes down a few thousand points again (very possible in my opinion) then I may take some of that cash and reallocate to make a few more bucks on the, hopefully, way back up... "Reply To: No choice paper/diversify or get out all together.
" my 401k has recovered and then some. did you friends make changes in their allocations at some point? if you got off the ride on the way down or at the bottom and never got back on then you could be in tough shape.
i like the diversity of the paper savings, they should be an inflation hedge.... "Reply To: No choice paper/diversify or get out all together.
" 20 years to retirement, would put you in your mid 40`s. I`m a horrible short term investor. I do know in the long term, Silver is a very good deal. Get off the rollercoaster of daily anguish or utopia, based on the current price. I`ve bought silver for many years, and never sold an oz. I may nev... "Reply To: No choice paper/diversify or get out all together.
The analysis and discussion provided on SilverDoctors is for your education and entertainment only, it is not recommended for trading purposes. The Doc is not an investment adviser and information obtained here should not be taken for professional investment advice. The commentary on SilverDoctors reflects the opinions of The Doc and other contributing authors. Your own due diligence is recommended before buying or selling any investments, securities, or precious metals. We do not share in your profits, and thus will not take responsibility for your losses as well.