This page has been archived and commenting is disabled.

Shanghai Gold Exchange Hikes Silver Margin By 20%

Tyler Durden's picture




 

Wondering what caused the dramatic plunge in gold and silver earlier? Wonder no more: the CME's counterpart in China, the Shanghai Gold Exchange, decided to follow through with an identical, if more substantial, action to that undertaken by the CME on Friday, and announced an increase in the Silver T+D contract margin from 15% to 18%, a 20% bump; the SGE also noted an increase in the price range limit from 12% to 15%, which will be promptly fulfilled, as margin hikes traditionally tend to lead to a sudden spike in vol, contrary to well-meaning expectations. There was a second announcement, slightly more cryptic one, noting that if volatility were to persist, the SGE would outright halt silver trading (although the Google Translation of this previously unseen form announcement is a little sketchy). Expect to see more exchange intervention in precious metals today. Regardless, those who bought silver 15% lower a whopping, oh, two hours ago, courtesy of the out and out sheer panic, are quite grateful to the Chinese.

The Margin hike announcement - link:

Member Unit:     silver Ag (T + D) contract Sept 23 close to seal the lower limit. According to "Shanghai Gold Exchange Risk Control Measures" of the relevant provisions, such as Ag (T + D) contract on Sept 26 (Monday) close to limit the same direction (ie, a second consecutive unilateral City), end of the day from the date of liquidation from the Ag ( T + D ) contract margin increased from 15% adjusted to 18% , the next trading day Ag ( T + D ) contract price limits range limit from 12% adjusted to 15% .

And the more cryptic one - link:

Silver Ag (T + D) contract Sept 23 close to seal the lower limit. If Sept 26, Sept 27 days Baiyin Yan swap transactions to limit the same direction, namely to reach the daily limit for three consecutive days, there will be the third consecutive unilateral City. According to "Shanghai Gold Exchange Risk Control Measures," the relevant provisions of Chapter II, once the third consecutive unilateral City, Spet 28 Exchange will suspension of silver Ag ( T + D ) the contract day, and the implementation of the following two measures to resolve any of the market risk.

    Measures one: 9 months 28 days to decide whether to take unilateral exchange or bilateral, in the same proportion or in different proportions, some members or all members to improve trading margins, some members or all members suspended new positions, adjust the up (down) circuit breakers rate to restrict some or all members of the withdrawal of funds, the deadline open, forced open, suspension and other measures to resolve in one or more of the market risk. Exchange of relevant measures will be Sept 28 12 -point first through the exchange website, Spet 28 at end of day settlement will go into effect.

    Measures II: Setp 28, the Exchange's trading positions held by members of Baiyin Yan period open for an agreement. Specific methods are: Exchange of the Sept 27 (third unilateral City) daily limit price at closing time to declare the transaction Baiyin Yan swap transactions did not open declaration to Sept 26 (second unilateral City) settlement The contract price and the net profit of customers by profitability position to match the size of the transaction, not in Sept 27 to declare open daily limit price does not enter the agreement positions open range. Recommended to prepare closing out of long positions will, in Sept 27 prior to the closing price to sell positions to declare the daily limit, once the exchange using measures two positions will serve as a basis for agreement. Positions held by the same customer-way, the first level their positions, then the method open.

    City in the event of three consecutive cases of unilateral, which measures the specific use, the exchange will be based on market conditions, in the Sept 28 12 -point first through the exchange website, please access the Member in a timely manner, and to prepare preparations.

    Such as Sept 27 closed, the Bai Yinyan swap transactions did not appear for three consecutive unilateral City, Sept 28 normally open for trading, and maintenance margin ratio 18% , Change stop range limit of 15% unchanged.

Exchange Special Note: As the silver market price volatility and uncertainty of exchange to take measures, in order to safeguard the interests of investors in their own, reminding investors carefully about the risks of exchange control measures, prudent market.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 09/26/2011 - 03:54 | 1709918 gorillaonyourback
gorillaonyourback's picture

not gonna help the cartel,,,, its game over for the fiat.  they can't print mo money and they can't afford not to print mo money.

Mon, 09/26/2011 - 04:08 | 1709986 ManufacturedOpinion
ManufacturedOpinion's picture

Damn - now THERE'S a scary thought:  Closing the gold/silver market.

How am I gonna buy more ???

Mon, 09/26/2011 - 04:28 | 1710066 eisley79
eisley79's picture

Thank you for posting absolute margins Tyler, we always want absolute as well as % change.

 

Keep up the good work

Mon, 09/26/2011 - 05:15 | 1710218 Sudden Debt
Sudden Debt's picture

If they close it and prices for the real stuff go to 500$ per ounce I'm selling :)

 

Mon, 09/26/2011 - 05:54 | 1710260 Banjo
Banjo's picture

As long as I can get FIAT I'm holding my silver. In Yugoslavia, Hungary, Germany and Zimbabwe among others once the FIAT printing got HOT it wasn't worth converting over :)

 

I would suggest hang on to the silver till you are ready to buy someting in the physical world.

Mon, 09/26/2011 - 06:12 | 1710274 unky
unky's picture

When he says $500/oz he means he will sell silver for things which cost $500 today. So he means he would use 32 oz of silver to buy a car for example. The $500 is just a figure to compare. Its quite hard to say 1oz for a computer, 1/100oz for a loaf of bread. Nobody would speak like that.

Mon, 09/26/2011 - 07:59 | 1710376 strannick
strannick's picture

LIke Feteke said, the price of gold/silver is on it's way to zero, as in, they will be unpurchasable with govt paper.

Mon, 09/26/2011 - 08:04 | 1710411 Sathington Willougby
Sathington Willougby's picture

"1oz gold will always buy a nice men's suit."

I contend that

"1oz silver will always buy a cheap suit."  What you do w/ it is up to you.  I suggest securing your medicine based business plan or maybe one based on foreign militarism with your new found cheap suit.  Dress him up like a cheerleader and pose him in a large state governor's office if you dare.  Hell, prop him up for the big office on the hill, you can destroy millions of lives there.

Mon, 09/26/2011 - 05:33 | 1710236 zhandax
zhandax's picture

That's the point...they can't close the gold/silver markets; they can only intimidate the futures traders.

Mon, 09/26/2011 - 03:54 | 1709920 Ahmeexnal
Ahmeexnal's picture

completely predictable.

Mon, 09/26/2011 - 03:55 | 1709921 ffart
ffart's picture

Isn't it funny how the more these exchanges act to drive speculators out of the markets in the name of "price stability" the more volatile the markets get.

Mon, 09/26/2011 - 03:58 | 1709941 macholatte
macholatte's picture

5 minutes after Europe opened everything reversed. What a surprise. What's gonna happen when NY opens?

Mon, 09/26/2011 - 03:59 | 1709945 Tyler Durden
Tyler Durden's picture

Talk of emergency 50 bps ECB rate cut. ECB denied it meaning it is probably imminent.

Mon, 09/26/2011 - 04:03 | 1709955 Smithovsky
Smithovsky's picture

more at 11

Mon, 09/26/2011 - 05:38 | 1710246 buzzsaw99
buzzsaw99's picture

you are obviously mistaken. china is the only country which can move commodities. [/sarc for emerging mkt copper-tards]

Mon, 09/26/2011 - 04:00 | 1709948 Edward Fiatski
Edward Fiatski's picture

"When China does business, why your pussy hurt?"

Mon, 09/26/2011 - 06:11 | 1710273 buzzsaw99
buzzsaw99's picture

you likey sweatshop, me likey sweatshop. why you so sore?

Mon, 09/26/2011 - 11:33 | 1711338 Ahmeexnal
Ahmeexnal's picture

roundeye want flied lice withs a stlaw?

Mon, 09/26/2011 - 04:00 | 1709949 LookingWithAmazement
LookingWithAmazement's picture

The Shanghai Gold Exchange is as corrupt as the Crimex and drives up prices. Now finally a shake-out.

Mon, 09/26/2011 - 14:25 | 1712179 thefedisscam
thefedisscam's picture

Shanghai Gold Exchange is NOT AT ALL more corrupted than the U.S. one!! as a matter of fact, they are LESS likely corrupted, because China still has NO power to mantipulate the global gold/silver market!!  whatever they do, is to follow what the CORRUPTED U.S. and EU have done! Period!

Mon, 09/26/2011 - 04:02 | 1709952 RagnarDanneskjold
RagnarDanneskjold's picture

Liu Jun Luo (???) predicted the crash in gold, he was just early by 10 months. Chinese buying has been bubblicious. Fitting that today was the day they launched the gold ATM at Wangfujing in Beijing! 

Mon, 09/26/2011 - 05:36 | 1710242 Going Loco
Going Loco's picture

10 months out in timing = WRONG

Mon, 09/26/2011 - 04:05 | 1709953 OldPhart
OldPhart's picture

I'll bet that translation sounded like beautiful bullshit in chinese, too.

City in the event of three consecutive cases of unilateral, which measures the specific use, the exchange will be based on market conditions, in the Sept 28 12 -point first through the exchange website, please access the Member in a timely manner, and to prepare preparations.

 While I get the general gist of the article I can sympathize with the ESL crowd. 

"Accessing" my "Member in a timely manner" and "prepared preparations"....hmm, chinese porno?

Mon, 09/26/2011 - 04:11 | 1710002 eigenvalue
eigenvalue's picture

I can give you a better translation. 

In the case of three consecutive days of limt down, the Exchange will decide which measure to take according to market conditions. The specific measure will be released at 12 PM Sept 28 (Beijing time). All exchange members are required to get informed on a timely basis and make preparations accordingly.

Mon, 09/26/2011 - 04:58 | 1710196 OldPhart
OldPhart's picture

Thanks, BUT

while your translation is much clearer, the original seemed so much more, um, 'whimsical'.

Mon, 09/26/2011 - 06:01 | 1710263 eigenvalue
eigenvalue's picture

 

I think this will be a better translation than the Google Rubbish :) I guess Tyler may use it to replace the lousy google version

All Exchange Members:

The silver AG(T+D) contract closed limit down on Sept 23 (AG (T+D) contract is similar to LBMA deferred accounts but it is an exchange traded product instead an OTC one). According Shanghai Gold Exchange Risk Control Rules, if AG(T+D) closes limit down again (two consecutive days of closing limit down), the margin level of AG (T+D) contract will be adjusted from 15% to 18% at the end of day and the price limit will be raised from 12% to 15% on the next trading day.

 

All Exchange Members

Silver AG(T+D) contract closed limit down on Sept 23. If the silver contract closes limit on Sept 26 and 27, i.e three consecutive days of being limit down, that will mean the third consecutive day of single directional market movement. According to relevant regulations in Shanghai Gold Exchange Risk Control Rules Chapter II, in the case of the third consecutive day of single directional market movement, on the trading day Sept 28 (21:00 Sept 27-15:30 Sept 28 Beijing time), the Exchange will suspend the trading of silver AG(T+D) contract for one trading day and adopt either of the following measures to deal with risks.

Measure 1: On Sept 28, the Exchange may raise the margin levels of some/all exchange member. The margin level may be raised on one party or both parties of the trading. The margin levels may be raised by the same percentage or different percentage for the two parties of the trading. The Exchange may restrain some/all exchange members from opening new positions. The exchange may adjust price limits. The exchange may restrain some/all exchange members from withdrawing money. The exchange may force exchange members to close positions before a certain deadline or close members’ positions on its own. The exchange may also stop the trading of silver AG (T+D) contract. The specific measure to be adopted will be released by 12PM Sept 28 Beijing time on the Exchange’s website and implemented in the end of day clearing process of Sept 28

 

Measure 2: On Sept 28, the Exchange will apple contractual position closing for all silver AG(T+D) parties, The process works this way:  when the market closes on Sept 27, the exchange will match all the unfilled orders to close long positions at the lower price limit with short positions based on the profit size of all the short positions. The settlement price will be the settlement price of Sept 26. The unfilled orders to close long position at prices other than the lower price limit will not be included in the contractual position closing process. The exchange suggest all the long position holders who are willing to close place their orders at the lower price limit before the closing on Sept 27. Once the exchange adopts measure 2, the orders will be used in the position closing process. If a position holder holds positions on both the long and the sides, all of his short position will be closed before the contractual position closing process.

In the case of three consecutive days of single directional market movement, the Exchange will decide which measure to take according to market conditions. The specific measure will be released at 12 PM Sept 28 (Beijing time). All exchange members are required to get informed on a timely basis and make preparations accordingly.

If on Sept 27, the silver AG(T+D) contract does not experience three consecutive days of single directional market movement when the market closes. On Sept 28, the trading will resume as usual, the margin level will be 18% and price limit will be 15%.

Special Note: Because of the volatility of the silver market and uncertainty of the specific measure that will be adopted by the exchange, for investors’ own good, the exchange suggest investors should carefully study the risk management measures that may be adopted and NEVER ACT ON AN IMPULSE.

 

Mon, 09/26/2011 - 04:03 | 1709954 eigenvalue
eigenvalue's picture

This is completely predictable. If you read Shanghai Gold Exchange Rick Control Rule, you will find that SGE just played according to the Rules. When gold/silver closes limit up/down, the margin and price limit will definitely be raised the next day. Shanghai Futures Exchange, Dalian Commodity Exchange and Zhenzhou Commodity Exchange have similar rules. 

Mon, 09/26/2011 - 05:10 | 1710212 honestann
honestann's picture

Please EXPLAIN to me and everyone why margin is INCREASED when prices FALL dramatically.  Please tell us how that makes ANY sense what-so-freaking-ever.

To increase margin when prices rise is rational, because it keeps the margin PERCENTAGE more-or-less constant.  The decrease margin when prices fall is rational, because it keeps the margin PERCENTAGE more-or-less constant.

So do please explain the logic of your claim.

Mon, 09/26/2011 - 05:42 | 1710251 buzzsaw99
buzzsaw99's picture

Please EXPLAIN to me and everyone why margin is INCREASED when prices FALL dramatically. Please tell us how that makes ANY sense what-so-freaking-ever...

 

Please tell me you're kidding.

Mon, 09/26/2011 - 07:48 | 1710360 Thomas
Thomas's picture

Why does a dog lick his balls?

Mon, 09/26/2011 - 09:23 | 1710702 Smiddywesson
Smiddywesson's picture

Because he can?

Mon, 09/26/2011 - 11:17 | 1711281 buzzsaw99
buzzsaw99's picture

:dog licks balls:

 

Thomas: I wish I could do that.

 

buzzsaw99: Go over there and be nice to him, maybe he'll let you.

Mon, 09/26/2011 - 21:46 | 1713598 honestann
honestann's picture

No, I am not kidding.  Are you?

The point of changing margin AT ALL on leveraged instruments is to prevent the leverage from getting excessive.  Got that?

Let's say you put up $1000 to control $10,000 for example, the $1000 being margin (to keep this simple, we'll say this is initial and maintanence).  This is 10:1 leverage.

If the price of the asset falls to the point where on contract only controls $9,000 then they should require $900 deposit so people STILL have 10:1 leverage.  There is no reason when the asset price drops to require $1,200 to control $9,000 when just before you only needed $1,000 to control $10,000.  That is fundamentally arbitrary and counterproductive.  As I showed, the required deposit should have dropped from $1000 to $900 to stay at 10:1 leverage.

Note:  Nobody is saying that people don't need to add money to their account to cover drops in the value of the assets they control on margin.  Of course they do!  We are saying there is zero justification to require $1200 to control $9,000 when last week $1000 was sufficient to control $10,000.  That is blatant manipulation designed to FORCE the price down further.

Mon, 09/26/2011 - 22:17 | 1713654 chindit13
chindit13's picture

Wow. The explanation should be patently obvious (as I suspect the other poster meant to imply), but apparently it is not.

The word you are looking for is:  volatility.

Exchanges and their members are on the hook for positions that go bad if the position holder doesn't pony up.  Margin levels are the means they use to protect themselves.  They have formulas---unpublished---on which they rely and that are based on a combination of price and volatility.  If the formula was based on price alone, you might have a point.  What you have failed to consider is that when a market begins to experience sharp moves, it is possible that a single day's move alone might wipe out the entire margin.  Margins tend to be around 3-5%.  Any market experiencing a 5% move in a day or over a few days, wipes out the margin of anyone who has been on the wrong side of the trade.  In order to protect themselves, the exchanges understandably raise margin levels. 

The exchanges also know the net position of the market, because every new position has to be declared as a commercial hedge or an outright speculation.  If the exchange knows the spec position to be heavily skewed one way or the other, then they know that a move contra to the net spec position is going to cause a lot of pain and a potential capitulation.  Thus in a market that is moving against the net spec position, the exchanges might be prudent if they consider a margin increase.

The reason that they tend not to publish the formulas is because the pit could run the market one way or the other in order to set off the margin hike and squeeze those on the wrong side.

 

 

Mon, 09/26/2011 - 22:30 | 1713674 honestann
honestann's picture

No, the reason they don't publish the formulas is because the formula does not exist as a formula.  The "formula" is simply a name given to the arbitrary manipulations ordered by JPM and executed by JPM agents at the exchanges.  This is so obvious to anyone who looks, it is laughable to claim otherwise.

They just saved JPM about $20 billion dollars.  Maybe more.

Mon, 09/26/2011 - 23:35 | 1713762 chindit13
chindit13's picture

I was not aware JPM controlled every single commodity, and every single exchange in the world.  Forgive me for being naive, but I thought 1.35 billion Chinese might be willing to stand up to Jamie Dimon, maybe even laugh at him the same way that laughed at Timmy Geithner.  Apparently I do not have access to the information you have, which would make what you say "obvious".  I also can't figure out why Jamie Dimon---who I suspect is kind of a greedy control freak with little or no conscience (only an opinion)---would keep Blythe Masters on the payroll if she indeed was up against it to the extent Max Keiser claims.  Certainly he could have replaced her with Jerome Kerviel and been better off, if the Keiser theory is correct.

Back to your original post, the dependence you cite on price and leverage alone is simply wrong.  Vol and net spec profile are considered as well, in everything from silver to frozen orange juice.

Mon, 09/26/2011 - 05:53 | 1710258 eigenvalue
eigenvalue's picture

In China, unlike in the US, margins are set as a percentage of the notional amount of the contract. For example, if the silver price is $30 per ounce, contract size is 5000 ounces and margin level is 18%, then margin you must place in your account will be $30x5000x0.18=$27000. If the price goes to $40, then the margin you must place in your account will be $40x5000x0.18=$36000.

But when market closes limt up/down, the margin level (as a percentage) will be raised AND/OR the price limit will be expanded at the end of the day. 

On Sept 23, the silver contract in China closed limit down, at the end of day, the silver margin (as a percentage of the notional) was not raised but the price limit was expanded for 10% to 12%.

Today, the silver contract closed limit down again. This time the margin level is raised for 15% to 18% and the price limit is expanded to 15%

Mon, 09/26/2011 - 21:33 | 1713583 honestann
honestann's picture

You did not explain why margin should be increased when the price FALLS, whether the fall is "limit down", or just "down".  You did not explain what I asked you to explain.

Mon, 09/26/2011 - 04:05 | 1709972 user2011
user2011's picture

Gainesville coins site was down for "maintainence" until 9:00am EST monday.   What a convinent arrangement when Silver was down to 26.xx.     I wonder if someone in Gainesville knew about the dip ahead of the time.   They just don't want to sell their inventory at the discount. 

Mon, 09/26/2011 - 04:07 | 1709978 OldPhart
OldPhart's picture

Silver may still go down more when NY opens.  Gotta keep real money disagreeable to the masses.

Mon, 09/26/2011 - 04:15 | 1710020 eigenvalue
eigenvalue's picture

Tomorrow will be the option expiry day. $20 silver tomorrow? Hopefully not.

Mon, 09/26/2011 - 05:08 | 1710208 Snidley Whipsnae
Snidley Whipsnae's picture

"Gotta keep real money disagreeable to the masses"

How does this effect real money? It appears to me that China is helping it's citizens purchase real physical bullion while at the same time discouraging citizen speculation in PAPER PMs.

It wouldn't hurt my feelings if all the crooked speculative metals exchanges jacked their margins to 100% and demanded physical delivery for anyone taking a position as a 'market maker'...

As long as paper PMs are allowed to set the price for physical PMs we will have no idea what the real price of physical is... and central banks thru bullion banks can continue to sell forward 'leased paper gold' to control the price of physical.

With a little luck the paper players will be whipsawed to oblivion... and a real physical market will arise.

 

Mon, 09/26/2011 - 05:12 | 1710214 Mr.Sono
Mr.Sono's picture

and when it does, there won't be physical in the market. hmm just wonder how long it will take before this happens.

Mon, 09/26/2011 - 05:54 | 1710259 Snidley Whipsnae
Snidley Whipsnae's picture

"and when it does, there won't be physical in the market."

Yes, there will be physical for sale in the market. At what price?... Now, that is the question you should have asked.

Another question you should be asking is: Will fiat currencies continue to be accepted for physical gold... and, if so, for how long.

Mon, 09/26/2011 - 07:32 | 1710337 Mr.Sono
Mr.Sono's picture

well thats the thing, who would accepted fiat currencies for gold? if people who buy gold know that fiat won't last, why would some one sell it. only time to sell is when you get new money system so that you would be ahead of the pack to invest what the future holds.

Mon, 09/26/2011 - 04:08 | 1709987 Mr.Sono
Mr.Sono's picture

yeah that pretty odd. i was about to load up.

Mon, 09/26/2011 - 04:23 | 1709988 Smithovsky
Smithovsky's picture

futures markets open at 6pm EST on sunday - i doubt they're stupid enough to not hedge so that just leaves too lazy to start working on a sunday when demand is skyrocketing.  not the brightest bulbs there.  they get the coins from the mint at spot+$2; they could charge a huge premium over the spot and people would still buy because it's down so much.  move on to the next dealer, this one is obviously run by a bunch of clowns

Mon, 09/26/2011 - 04:25 | 1710063 Mariposa de Oro
Mariposa de Oro's picture

Funny you mention a huge premium. I noticed the premium for a Mexican Onza at Apmex is now $74.99. I'm pretty sure it was $64.99 a few days ago.......

Mon, 09/26/2011 - 04:45 | 1710104 Smithovsky
Smithovsky's picture

of course - gold was $1900 a few weeks ago and is $1600 now, so they figure their customer won't care about another $10.  to them, however, it's an extra 100-150% profit (assuming they pay a 3% gold coin premium to the mint like in US).

Mon, 09/26/2011 - 08:06 | 1710418 DosZap
DosZap's picture

Mariposa,

ApM&%,has turned into the biggest whores in the market.

I used to use them exclusively,until I found out that JPM is their bank,then it was a no brainer.

Mon, 09/26/2011 - 04:41 | 1710127 BigInJapan
BigInJapan's picture

Where are all you COMMIES coming from, anyway?!?!?!

What? Really? And somebody here was flapping their lips about APMEX "gouging" people with high premiums on the weekend, and saying Gainesville was "Down for the cause" because they kept "the same low premiums".

This is capitalism in its pure form. I wouldn't sell either.

Gotta know when to hold 'em.

Mon, 09/26/2011 - 04:50 | 1710171 Smithovsky
Smithovsky's picture

no one is saying it's bad, just the opposite - it's just good business.  demand goes up, charge more.  what's bad is that a dealer like gainesvillecoins abandons their customers when they're desperate to buy and would be more than happy to pay a higher premium because of the huge drop in price.  besides alienating their customers, the dealer is missing out on huge profits as well.  instead of both sides winning, both end up losing bigtime.  

Mon, 09/26/2011 - 06:02 | 1710266 Snidley Whipsnae
Snidley Whipsnae's picture

"besides alienating their customers, the dealer is missing out on huge profits as well."

If Gainsville is sitting on silver eagles that they paid $44 for and they sell them for $34 would you say that is good business?

Maybe Gainsville can cover their losses with larger volumn? lol

Please think about what you are typing prior to typing.

Given the choice of alienating a few selfish custormers that think a company should sell their inventory at a loss for the benefit of the customers, or, going out of business because of heavy losses on silver sales... which choice should a prudent businessman make?

Put another way... Why should Gainsville go BK so you can make windfall profits?

 

Mon, 09/26/2011 - 07:21 | 1710282 Smithovsky
Smithovsky's picture

I hope you're joking.  Do you think they hold millions of dollars of inventory without hedging it with futures or GLD?  Their profit comes from the premium, not from buying at 44 and crossing their fingers and praying to god that it doesn't go down.  You're showing a lack of basic understanding of commodity business.

A gold dealer usually buys $X physical and sells the equivalent amount in, say, the COMEX futures.  As they sell off their inventory, they buy back the futures.  Let's take gold American Eagles.  A business can buy them from the US mint at spot+3%, with a minimum of 1000 coins.  So let's say a business like gainesvillecoins buys the minimum when the spot is trading $1600.  They pay $1,648,000 to US mint and they sell 10 gold futures in the market at $1600 ($1.6M value).  We'll say 10 and keep capital gains taxes out of this, to keep this simple.  Now they're fully hedged and they don't care whether the price of gold goes up or down.  Now, when you buy from a gold dealer, you'll notice how prices are pretty much in line at all of them?  That's because they all charge spot+3%mint premium+their own markup (usually 1-3%).  If gold goes down to $1000, the dealer doesn't lose anything because his futures short offsets his physical longs.  His profit comes only from his own markup.  Of course, if a dealer is himself bullish on PMs then he won't fully hedge his inventory, and I'm sure some of them don't, but then their profits are a lot more volatile.  But to suggest, as you do, that a serious dealer whose minimum inventory is in the millions of dollars (some of them in the tens of millions) is not close to 100% hedged in a commodity which can move 15% in less than a week, is absurd.  In your world, if gainesvillecoins bought all their silver inventory at, say, 35 (they pay spot+$2 to the mint for silver coins), then they'd have to 'close down for maintenance' every time spot went under 33 because all the other dealers would be able to sell it for much cheaper than they, since they are hedged and can sell at spot+$2+own markup. A bullion dealer pretty much has to be fully hedged in order to keep operating, otherwise they'll have to (temporarily or permanently) shut down when spot goes against them.  

I realize the future multiplier (100 for gold and 5000 for silver) is pretty high but it's the most liquid and trades almost around the clock during the work-week.  I imagine for smaller size they hedge with GLD or SLV when the market is open and I suspect this is what gainesvillecoins does - hence the re-opening time at 9 EST on Monday - market isn't open yet but most high-volume stocks already trade by then.  More serious dealers probably have an account with a place like BullionVault, which is open 24-7.  It's not as liquid during the weekend, but at least it's open and they can unwind their hedges there anytime.  

ETFs have a disadvantage of short-stock cost, but a big advantage of hedging with ETFs, one some dealers realize, is that it's a perfect play for when everyone realizes that they're not worth as much as their price suggests.  When it finally dawns on everyone that nothing close to 100% of ETFs are backed by physical, the dealers will profit handsomely on both legs.  Basically, being a PM dealer is one of the best businesses to be in right now.  It has no downside (hedged), pays dividends (markup), and has humongous upside.

Mon, 09/26/2011 - 08:16 | 1710450 Blankman
Blankman's picture

Thanks for the info Smithy. I always wondered how those places made$$$.  Learn something new everyday here on ZH :)

Mon, 09/26/2011 - 08:27 | 1710466 Snidley Whipsnae
Snidley Whipsnae's picture

I was half owner of a coin/bullion shop in Maryland in the late 60s - early 70s. We carried our inventory using cash reserves; ie, unhedged.

Maybe Gainsville is hedged, maybe not. You don't know either way, unless you are privy to their biz plan and ongoing operations.

IOWs, you are making a hell of a lot of assumptions.

Mon, 09/26/2011 - 08:52 | 1710517 Smithovsky
Smithovsky's picture

Oh boy.

That explains a lot, at least I can see where you're coming from now.  In the late 60s-70s there was no such thing as internet or online stock brokers or gold ETFs or futures.  If you wanted to hedge yourself it would be very very difficult and very very expensive.  These sites sell thousands, tens of thousands of coins per day so their inventory, and hence risk (if unhedged) is probably a bit bitter than your coin/bullion shop in late 60s-early 70s.  Also, these days, if a gold dealer sells 100 1oz gold coins, all he has to do is click his broker icon on his iPhone, buy back 1000 GLD shares, and he's eliminated all his risk and pocketed $3200 risk-free (2% markup on $160K worth of coins).  Snidley, as much as you yearn for the good old times, I'm afraid times have changed in the last 40 years, business has changed and the world has changed (mostly for the worse).  

You're making a big assumption that I'm making assumptions, not stating facts, if you catch my drift ;)

Mon, 09/26/2011 - 08:58 | 1710550 tmosley
tmosley's picture

Not everyone hedges.  You can usually tell which ones don't by whether or not they are open on a day like today.  Find their downtime statistics and calculate the likelihood that they "just happen" to be down today of all days.  I'd bet the probability is less than 0.5%.

Mon, 09/26/2011 - 09:20 | 1710626 Smithovsky
Smithovsky's picture

You're missing the point.  Everyone hedges.  The smaller joker-dealers hedge in GLD and SLV or with the futures, so they can only unwind their hedges when those markets are open.  The bigger, more serious ones, who don't want to alienate their customers, hedge in markets which trade 24-7 but which are not as accessible to the smaller dealers either because of their size or just pure laziness.  

Mon, 09/26/2011 - 09:21 | 1710696 tmosley
tmosley's picture

Nope.  You are 100% wrong.  Small dealers by and large do not hedge.  This is why I won't be able to buy physical silver locally for the next two weeks or so, barring further declines, which will only push it back that much more.

MOST small dealers are, in fact, gamblers, which is why they won't last.  The smart ones, and the ones that last a long time are hedged, but that is a minority.  Sorry, that's the way it is.

Mon, 09/26/2011 - 09:38 | 1710769 Smithovsky
Smithovsky's picture

I'm sure there's one or two idiots out there but I think you have a few things mixed up. 

The reason you won't be able to buy anything in the next two weeks or so is because the moment prices started going down hard, everyone descended on the dealer and bought up his whole inventory.  It's not that he's not sitting on them, he genuinely has nothing to sell (and OK, the small ones who didn't hedge are sitting on them, praying to god it goes back up quickly so they can resume business).   

It takes a few weeks to order new coins from the mint, that's why you're going to have to wait.  If your dealer had any brains, and if you were willing to agree to it, of course, he'd take your order at these prices and promise to deliver when the new inventory arrives.  He can order from the mint at today's spot+mint premium (3% for gold 1oz eagle, $2 for silver 1oz.eagle)

But, of course, if you'd agree to that, then you might as well order from an online dealer, which is what you should do now, and not wait 1 or 2 weeks to buy from your local dealer, when prices might be higher.  

A lot of people here seem to think that the coin market is the physical market.  IT'S NOT! Production always lags demand, so if there's a spike in demand, it takes the US mint a week or two to step up the production.  Just because you can't get coins from your local dealer doesn't mean that there's no physical out there, it's just that the producers don't have a crystal ball and couldn't have predicted the 15% drop and a corresponding increase in demand for coins.  Order online from big dealers and you won't have the gratification of having it in your hand today as you would with a local dealer, but at least you'll lock in today's big downtick, albeit you'll have to wait a few days to hold it in your hand

Mon, 09/26/2011 - 09:48 | 1710839 tmosley
tmosley's picture

Sorry, you don't know what you are talking about.  Dealers were open on Friday, but didn't open on Monday.  DIDN'T OPEN.  Hell, one of the dealers in town just got shut down because he got robbed but didn't have insurance, and couldn't deliver a large shipment that he had already taken money for.  The fact is that if they were genuinly out of inventory, they would be open hoping people would come in to SELL.  

Also, nice job trying to convince us that people who buy and sell a product are not the market for that product.  

Mon, 09/26/2011 - 10:31 | 1710971 Smithovsky
Smithovsky's picture

OK, you win, not 100% of dealers hedge.  Like I said a bit earlier, there are a few out there but othose are gamblers and will only do what's best for them, screwing you in the process.  They are not the market and they're not in it for the long-term. They are local here-today-gone tomorrow gamblers and just because they're lying to you by not opening or trying to sell you a silver eagle for $40 when you can buy it for $33 on kitco or tulving or apmex or whatever else is out there, doesn't mean that the physical is now worth $40 or that there's suddenly a shortage of physical out there.  The coin market is miniscule compared to the total bullion market, and the 'local-store' coin market is miniscule compared to the total coin market, since most volume is done online, so don't take your cues from your local coin store not being open on Monday.

If you really want to take full advantage of the downticks but don't trust the paper PMs in the long-term (as you shouldn't), open an account with a broker, put in your bids in GLD or SLV where you want to buy and once you buy go to the online dealer which has the smallest premiums, buy from them the same $ amount value, selling the ETFs at the same time.  You'll lock in the price you want and will hold physical and nothing else.  It will be much much cheaper than buying from a local store and you'll never have to worry about not participating on the day of the big downtick.  

Mon, 09/26/2011 - 09:49 | 1710681 Smithovsky
Smithovsky's picture

What exactly did you sell in your shop?  

Mon, 09/26/2011 - 09:25 | 1710712 tmosley
tmosley's picture

"Coin/bullion shop"

"Late 60's"

Wait, what?  I thought gold ownership was illegal in the US until 1974?  Or did you just sell silver?

Mon, 09/26/2011 - 09:15 | 1710639 DosZap
DosZap's picture

Smith,

BINGO...........My point exactly.........................GREED.

Seems to be Pandemic these days.

(The only exception to your rule, is if it's a small dealer and they cannot afford to hedge,or choose not to).

But, the BIGGIES we are discussing, are disgusting.

Mon, 09/26/2011 - 07:39 | 1710349 Mr.Sono
Mr.Sono's picture

other company's just put larger margin hike on the price. what Gainesville did is "no words". but i do still think silver will get to low 20's and they will pay the price.

Mon, 09/26/2011 - 08:19 | 1710452 DosZap
DosZap's picture

BigInJapan

Are  you in the BUSINESS or not?

You make your profit ON the PREMS,either your IN the business or OUT .

Commies my ass................

AP#$% has been gouging for months,....................................FEM, and FEED em F HDS.

Mon, 09/26/2011 - 05:00 | 1710199 OldPhart
OldPhart's picture

http://bullion.nwtmint.com/

up, open and taking orders (premium may be higher)

Mon, 09/26/2011 - 08:41 | 1710500 DosZap
DosZap's picture

http://bullion.nwtmint.com/

Cant get them to deliver promptly in  good times.

Mon, 09/26/2011 - 09:09 | 1710610 Sean7k
Sean7k's picture

Never use NWT mint. They are terrible about delivery. You will spend months wondering whether to ask for your money back or whether to file a complaint with the Attorney General.

Mon, 09/26/2011 - 05:14 | 1710217 Troll Magnet
Troll Magnet's picture

wow...i'm really disappointed that gainesville would do this.  

Mon, 09/26/2011 - 05:17 | 1710221 Troll Magnet
Troll Magnet's picture

buy from providentmetals.com or tulving.  there are others.  monarch.  scootsdale. 

Mon, 09/26/2011 - 05:44 | 1710255 buzzsaw99
buzzsaw99's picture

so paper silver does have its merits then?

Mon, 09/26/2011 - 05:58 | 1710262 OldPhart
OldPhart's picture

Definitely, you can use the paper to roll a super-doobie, heat your house, remove unwanted fecal matter from your posterior...

Mon, 09/26/2011 - 06:09 | 1710270 buzzsaw99
buzzsaw99's picture

Just giving Troll Magnet some business there OldPhart. ;)

Mon, 09/26/2011 - 06:05 | 1710268 Blano
Blano's picture

There were lots of excuses for not selling over the weekend.  Went to my coin shop just to see if they were selling anything and they flat out said no unless I was willing to buy at cost, which was $40 and up.  No thanks.

Mon, 09/26/2011 - 06:27 | 1710280 FEDbuster
FEDbuster's picture

For now dealers are holding out for higher prices on physical.  Went to the coin shop on Sat. and their "junk" silver coins still selling at 28x face.  I will be watching ebay this week to see if prices come down.  Should be at about 20x face or less.  Good time to buy from weak hands.  The FED has no choice but to print, Fedzilla must be fed fiat or it will die.  The govt. can only suck up all the available capital, then they have to print more.  Trillion and a half dollar deficits can't be maintained without massive money creation.  Not to mention swaps and other treasonous acts.

Mon, 09/26/2011 - 07:21 | 1710324 goldfreak
goldfreak's picture

I was at a coin show Saturday and Gainsville people were there, selling rounds for 32.50, 90% silver at 23 X face value, they had run out of eagles by the time I got to them. 2011 Pandas at 38.

Bought about 500 worth of stuff. I don't blame them. If the Criminals want to knock paper silver to 10, does that mean they have to give it away knowing it's worth 30? Were I in their place I'd do the same

Mon, 09/26/2011 - 08:52 | 1710511 Saxxon
Saxxon's picture

There's no premium for Pandas in China right now.

You sit in the lobby of a PBOC branch and the captive audience video rolls out infomercials of newly-minted commemorative gold and silver coins and ingots, over and over.  Literally dozens of different, new ones.  

The Panda carry trade is over and any premium you pay here you will eat.

And the PRC Chinese have no interest in our coins.

On Party-run t.v. (every single channel and every single line of print you read in the PRC is filtered through the Party) you have interminable ads for coins, replica coins, fake banknotes (the serial numbers are used as a quasi-lottery, semi-collectible), and reproduction ceramics.  

Every trick in the book is employed ("our phones are ringing off the hook!") [cue phone effect].  Like the dealers are dealing with the biggest bunch of rubes who ever rode into Main Street on a load of watermelons.  And maybe it's true.

It was interesting being in a country where anyone who wants a job can have one; and the middle class is walking down the Midway with their pockets stuffed with Yuan and eyes shining.

But that may be changing soon.

I'm staying in cash.

Mon, 09/26/2011 - 14:09 | 1712075 thefedisscam
thefedisscam's picture

"There's no premium for Pandas in China right now." ???

That is NOT true!! can you point out ONE place that I can buy  'no premium" panda coins?

Everywhere I look, still selling for 7%*8% higher premium than Canadian Maple leafs! And Maple leaf price is still well above silver spot price!

here is an example, and Gainesville coins price is pretty competitive!

Panda --Bank Wire Price: $37.81/Credit Card Price: $38.87

http://www.gainesvillecoins.com/products/157011/2011-silver-1-oz-chinese...

 

maple leaves--Bank Wire Price: $34.51/Credit Card Price: $35.47

http://www.gainesvillecoins.com/products/156308/silver-maple-leaf-1-oz-9...

Mon, 09/26/2011 - 07:59 | 1710377 DosZap
DosZap's picture

user2011.

Had the same damn thought, these dicks piss me off.(How fortuitous)

AP#$% the biggest Prems on the block.

When Gold was dropping last Weds my online Dealer sit CLOSED the market at a $100.00 down.(could still phone in orders) but not sell or buy online.

Floor caves in, metals are dissapearing and the prems are going WAY up.

Mon, 09/26/2011 - 10:15 | 1711002 tekhneek
tekhneek's picture

There's no law that says they have to take a loss just because you want to buy..

Mon, 09/26/2011 - 12:27 | 1711660 EINSILVERGUY
EINSILVERGUY's picture

Yeah

I was on the site trying to place and order and they rejected it. Sais the bank denied my CC. I called the bank and they said there wasn't a problem. I actually saw the item pending in my account. Went back to Gainsville and was able to get the order processed but at a $40 shift. Guess which way. I called gainsville and they had no record of my previous order and said they were swampled. I was online last night after 9:00 and the site was not down for maitenance. It was down at 7:00am cst. Sounds like they could have taken it down as a result of the drop but they woouldn't have to. They just wouldn't change prices. I noticed the spreads have increased from last night. Still got 96 ounces at $31.50 . Will wait to see if we go down to $25 and will average dollar cost more

 

Mon, 09/26/2011 - 12:29 | 1711670 EINSILVERGUY
EINSILVERGUY's picture

Yeah

I was on the site trying to place and order and they rejected it. Sais the bank denied my CC. I called the bank and they said there wasn't a problem. I actually saw the item pending in my account. Went back to Gainsville and was able to get the order processed but at a $40 shift. Guess which way. I called gainsville and they had no record of my previous order and said they were swampled. I was online last night after 9:00 and the site was not down for maitenance. It was down at 7:00am cst. Sounds like they could have taken it down as a result of the drop but they woouldn't have to. They just wouldn't change prices. I noticed the spreads have increased from last night. Still got 96 ounces at $31.50 . Will wait to see if we go down to $25 and will average dollar cost more

 

Mon, 09/26/2011 - 04:09 | 1709990 RagnarDanneskjold
RagnarDanneskjold's picture

I just read the Chinese, that last bit is not about halting trading in silver. It just reminds traders to review the exchange's risk-control policies before they enter the market.

Mon, 09/26/2011 - 14:02 | 1712028 thefedisscam
thefedisscam's picture

You are reading a WRONG piece! Here is the correct piece that mentioning one day of halting if the market has three "Dan Bian Shi" in a row.

http://www.sge.sh/publish/sge/jyzn/jysgg/7470.htm

 

What is Dan Bian Shi

http://finance.sina.com.cn/money/future/20100415/02087752074.shtml

Mon, 09/26/2011 - 04:11 | 1710000 Mr.Sono
Mr.Sono's picture

looks like they are trying to shake off weak hands, that will be drooping like bugs. and stronger hands will be getting it at a discount prices.

 

Mon, 09/26/2011 - 04:10 | 1710001 Zgangsta
Zgangsta's picture

Bank Wars III: Revenge of the SLV.

Mon, 09/26/2011 - 04:17 | 1710034 JLee2027
JLee2027's picture

There was a second announcement, slightly more cryptic one, noting that if volatility were to persist, the SGE would outright halt silver trading (although the Google Translation of this previously unseen form announcement is a little sketchy)

Like closing a paper market would be a threat, lol.

Mon, 09/26/2011 - 04:18 | 1710039 Goldenballs
Goldenballs's picture

Blackmarket in Politician and Bank proof assets starting very soon.They do not care about the how economies and people suffer,only that they stay on the gravy train and in control,in reality they are failing and spending ever increasing amounts of ever more worthless fiat to save banks and a system that has collapsed in insolvency and debt.Gold and Silver to infinity. :) :)

Mon, 09/26/2011 - 04:22 | 1710049 Who is John Galt
Who is John Galt's picture

I know. I am getting quite a chuckle reading the comments of the trolls and scaredy cat pussies that there is a panic in PMs. Its simply not true. This is a gift for the wise. Take advantage of it because it wont last long.

Mon, 09/26/2011 - 04:59 | 1710198 honestann
honestann's picture

Yes.  I am 99% certain we will NEVER get another opportunity as sweet as this one.  Perhaps the middle of today or tomorrow will be the low.  Or maybe the low is already in, but not confident of that... yet.  The western markets have not had a chance to wet their pants yet.

Mon, 09/26/2011 - 09:47 | 1710834 Smiddywesson
Smiddywesson's picture

Yes, the only question in my mind is how long they will orchestrate the selling and how low prices will go.  Don't gold prices usually go down into options expiry and then rise on the actual day  (which is tues)?

Mon, 09/26/2011 - 04:27 | 1710065 Mr.Sono
Mr.Sono's picture

very true, and i think that we will see silver in 20's. they will do anything and everything to save there banking system. and that means selling there paper silver and gold to cover the losses and keep them afloat. the boat is sinking.

Mon, 09/26/2011 - 08:45 | 1710439 DosZap
DosZap's picture

Mr.Sono,

Pricing it in the $20's isn't helping me at all, I cant get any.

By the time the mkt opens it will pop $3-$4.

Last night,was enough to pull out hair.Prices not seen in MONTHS, unable to buy.........

Mon, 09/26/2011 - 08:47 | 1710440 DosZap
DosZap's picture

Do this bloodbath mean we can call the ALMOST PM's?...............LOL

Smile, stack, if you can get it, because it will be WAY up come end of of year.

Mon, 09/26/2011 - 04:28 | 1710060 Conax
Conax's picture

 

All your investment paper are belong to us.

I hope this one back fires. If the wholesale supply were to really dry up, we might just get that moonshot.

I know, I know..

Mon, 09/26/2011 - 04:28 | 1710067 Strike Back
Strike Back's picture

Goddam these fucking banks.  Coordinated, international margin hikes to break 1600/30.  Didn't last long though.  Was sweating.

Mon, 09/26/2011 - 04:34 | 1710093 foofoojin
foofoojin's picture

Try being 100% phys.  It's 1:30 am and I have a test on Greek mythology tomorrow. I'm nursing my stomach on plan quick oats and a little warm milk. gotta sleep soon. somehow I gotta sleep soon.

Mon, 09/26/2011 - 04:43 | 1710133 Strike Back
Strike Back's picture

They had an herb for that in college.  Good luck.  We'll be alright.

Mon, 09/26/2011 - 04:44 | 1710145 scatterbrains
scatterbrains's picture

I havn't slept a wink all night either... no test here but good grief I almost shit my pants I laughed so hard reading your post whew!  The things we get ourselves into  lol.   but seriously good luck with your test.

Mon, 09/26/2011 - 05:07 | 1710205 OldPhart
OldPhart's picture

Shit, I'm up too, of course I get to go under the knife tomorrow to fix a hernia.

But the answer to your problem is:

Venus

Mercury

Furies

Persiphone

Roman

Andromeda

Medusa was an evil bitch after she fucked with gods.

Parallels in Greek/Roman mythology are astounding.  Names are changed to protect the innocent.

There are ancient themes resonant between Zeus, Jupitor and Jesus, all are sun(son) gods.  All can unleash hell on earth.

 

Hope that helps.

Tue, 09/27/2011 - 14:29 | 1710213 Colonel
Colonel's picture

 

 

Mon, 09/26/2011 - 05:49 | 1710247 Smithovsky
Smithovsky's picture

today's early-morning lows were 1535 in gold, 26.15 in silver.  High-low 8% in gold, 17% in silver.  incredible

Mon, 09/26/2011 - 04:43 | 1710125 Gavrikon
Gavrikon's picture

Well, I for one appreciate the silver raid this morning.  Just sent off an order for another 100 Silver Phillies for about 500 Euros less than last time.  

Thanks very much, inscrutable ones!

Ich LIEBE gold.de!!!

Mon, 09/26/2011 - 08:53 | 1710535 Mr. Fix
Mr. Fix's picture

Fancy meeting you here!

Mon, 09/26/2011 - 04:43 | 1710144 unky
unky's picture

Earlier today one of the biggest German dealers (proaurum) closed its website due to "server problems". Now that  silver is near $30 again, they open again.

Mon, 09/26/2011 - 04:45 | 1710150 Gavrikon
Gavrikon's picture

I used to buy from those guys, until I found gold.de.  Now I just buy from whomever is cheapest.

Mon, 09/26/2011 - 05:41 | 1710250 unky
unky's picture

Now that they are open again they are almost sold out on all silver products except Maple Leaf and Philamonic, lol https://www.proaurum.de/preisliste.jsp?action=performSearch

Mon, 09/26/2011 - 04:45 | 1710148 Negro Primero
Negro Primero's picture

Courtesy...From UBS:

26-Sept.2011

Precious Metals Washout Persists 
 
Precious metals on Monday have continued the sea-changing momentum of late last week and currently sit deep in the red, with silver leading the pack lower. As we feared and wrote in Friday's daily, gold fell to our $1650 target, but even there,
persistent selling sent the metal to lows of $1629. This morning, gold wasn't capable of holding on to a $1600 price-tag, and a price closer to $1500 is possible before day's end. While gold's retracement was not really a surprise, the depth of its plunge certainly was. A rising fear factor coupled with sinking confidence levels
should be helping gold, but this isn't happening because of overriding concerns about liquidity, European bank funding and margin calls amid a stronger US dollar. For now, investors are only finding comfort in the relative safety of cash. Paradoxically, gold and its sister metals are in need of a stabilisation in risk aversion to help reduce the current panic.  
 
 A lot of gold liquidation has clearly taken place over the past few days and there's a high risk of more, particularly if large investors pare exposure. The latest COTR to Sept 20 shows that Comex net longs narrowed by 1.6 moz to 25.2 moz. Its quite possible that heavy selling since last Wednesday could leave the Comex gold book close to the 21.6 moz level seen in late January, following gold's severe New Year  washout, when investor optimism  regarding growth was rising and the need for safe havens like gold was falling. Indeed  back then, while specs were busy selling, intense demand from physical markets, particularly China and India, was the strongest signal that a price floor was nearby. We remain very worried about the near-term direction for precious metals. We have been unconvinced about PGM strength for some time. But what might have started as forced margin call selling to cover losses elsewhere now has the potential to become a game-changer for precious metals. Gold is one of the few assets that remains in positive territory this year, in a sense it is one of the last assets standing, and because of this as investors head for cash they sell the assets that have performed. Essentially gold is a victim of its own success as liquidity trumps. And although we see further losses ahead for gold, we extracted a number of important variables from Friday's price action as potential signposts. First, across a host of regions and product types, physical demand was the strongest we've seen since January. India stepped up to the plate as gold priced in rupees dropped 4%. Volumes last Friday were well above average and the highest since late August. Chinese buying was strong throughout the day as well, adding up to amounts we haven’t seen in a quite a few months. This is also reflected in physical turnover on the Shanghai Gold Exchange, which is the highest since January. On the retail side, there was very good demand for coins and bars out of Europe. And in a sign that fear levels are rising, the conversion of gold from metal accounts into physically allocated accounts was also evident, highlighting the underlying fear that will ultimately benefit gold once the air clears. Second, although sellers had the upper hand on the day, gold's move below $1680 brought out smart real money-type buyers. Clearly, directional accounts have an appetite to take advantage of more opportune gold prices that haven't been seen since July. If these quality buyers multiply, we believe gold would have a base on which to consolidate, although this morning's actions suggests that is still some time away. Determining a price floor right now is undeniably difficult, particularly as it looks like all the dominos are falling over. But based on the signals above, we think there are at least positive theoretical signs that point to a floor being nearby. Although physical buying rarely drives prices aggressively higher, it is certainly useful in providing a floor, as was the case in late January. There is no way we can fully explain silver's heavy fall. It is the most irrational of the precious metals. And for now we cannot rule out a move back towards $20. While investors operate cautiously, we think silver is in danger of leeching further. Asian sellers have been quite prolific. The gold/silver ratio now sits above 60, its not inconceivable to look for it to extend to 70. We believe silver will most likely remain the biggest casualty in this environment.

Comments

Gold's sharp fall through
the key support of
1704.25 has signalled
scope for extension of
losses. It now heads
towards 1542.38, 61.8%
retracement of 1308.25-
1921.15 rally. A break
below this level would
expose 1478.83, a key
low from July 1.  The
metal is oversold on
hourly basis, there is a
possibility of correction.
Resistance is at 1664.03,
the intraday high.

For silver, the momentum
is negative. The sharp
sell-off through 32.31 is
testing 26.40, a key low
from Jan. 28. A clear
break below this level
would signal scope for
further weakness towards
24.99 and 24.25, 61.8%
retracement of 8.46 -
49.79 rally. The metal is
oversold, so a near-term
correction is a possibility.
Near-term resistance is at
31.06, the intraday high. 

Mon, 09/26/2011 - 04:52 | 1710169 Gavrikon
Gavrikon's picture

I hate to sound like a cliche, but if Silver falls below $20, I am backing up the proverbial truck.

BTW, not really interested in the technicals in a criminally manipulated market.  I just buy physical on the dips and thank God for the opportunities.

Mon, 09/26/2011 - 05:10 | 1710211 OldPhart
OldPhart's picture

Strange, my gold and silver didn't liquidate.  It's still in solid coin form.  Not even warm.

How hot does it have to get for my coins to liquidate?  Don't know yet, haven't had to buy groceries with them.

Mon, 09/26/2011 - 05:47 | 1710254 Isotope
Isotope's picture

Major hot. Very major hot.

Mon, 09/26/2011 - 05:16 | 1710220 mjk0259
mjk0259's picture

So it's going to go up unless it goes down.

Mon, 09/26/2011 - 04:48 | 1710168 honestann
honestann's picture

What?  So now the Chinese are an arm of the federal-reserve-predator-association?  Obviously so.  Man, buy physical everyone, and stay infinitely far away from every form of paper except charmin.

Mon, 09/26/2011 - 04:50 | 1710173 Gavrikon
Gavrikon's picture

Done and done.

BTW< is charmin a new form of FRN?  Hope it's soft and fluffy, as the commodity exchanges are burning my ass at the moment.

Mon, 09/26/2011 - 10:45 | 1711171 jonan
jonan's picture

the ROI on charmin is actually postive, can't find the paper for less than $15 around here...how's that for "shit" paper...

gold

guns

and toilet paper

who would have ever thought?

Mon, 09/26/2011 - 04:51 | 1710175 mesje
mesje's picture

>There is no way we can fully explain silver's heavy fall. It is the most irrational of the precious metals. And for now >we cannot rule out a move back towards $20. While investors operate cautiously, we think silver is in danger of >leeching further.

Maybe even... the most irrational of all barbaric relics [ ;-) ].

...And it does sound like an extremely credible recommendation :-)

Mon, 09/26/2011 - 05:34 | 1710232 agent default
agent default's picture

What do you want them to say? That the too big to fails have pulled all stops in manipulation?

The silver market is small and as a result, it is subject to easy manipulation. And there is plenty of evidence of that.  But the supply/demand fundamentals are going to drive the price higher eventually.  Notice that more and more people are actually taking delivery of silver instead of just playing the paper markets. It is those who are on margin that are getting out, the strong hands keep buying and the more of them in the market the more the demand for physical delivery will go up.  How much of their paper can the paper sellers settle in physical?  Maybe the volatility is the result of the imminent destabilization of the paper market due to the increasing demand for physical.

Mon, 09/26/2011 - 04:54 | 1710183 myne
myne's picture

God, I need to remember 2008 a lot better.

It's like watching an American remake of a British show. You know the gist of the story, but you can't be sure it's going to mean the same thing.

Mon, 09/26/2011 - 04:58 | 1710197 NZ Watcher
NZ Watcher's picture

Gold has moved up $100 in less than 2 hours

Thats 200$ movement in approx 4 hours

Someone must be making a sh~t load of profit

Markets are mad crazy - out of it !!!

Mon, 09/26/2011 - 09:00 | 1710555 Hephasteus
Hephasteus's picture

Trying to cause a panic. Didn't work.

http://www.youtube.com/watch?v=vc6vs-l5dkc&ob=av2e

Mon, 09/26/2011 - 05:04 | 1710204 enote
enote's picture

sign a petition to re-establish the gold standard

http://wh.gov/4Tq
Mon, 09/26/2011 - 08:03 | 1710381 AE911Truth
AE911Truth's picture

Re: "sign a petition to re-establish the gold standard" enote

Dude No! Do you want to repay your debt in gold? No. This is what the banksters want.

Please, make/sign a petition to Free Gold of transaction tax. Like in Utah. You don't pay tax to convert euros to dollars. You should not have to pay tax to convert your wealth from your unit of transaction currency (dollars) to your unit of savings (gold and silver).  See FOFOA for details. Google FOFOA

 

Mon, 09/26/2011 - 08:30 | 1710471 DosZap
DosZap's picture

If it's LEGAL tender, paying taxes should be illegal.

Mon, 09/26/2011 - 13:48 | 1711960 thefedisscam
thefedisscam's picture

Hey, You need gold to back up gold standard!!

Are you sure the U.S. gold reserve is not MOSTLY EMPTY??

Mon, 09/26/2011 - 05:19 | 1710222 ivars
ivars's picture

Silver went to 26 on Monday, amazing! Exactly where it was predicted to land in this time in this March prediction chart(25-32USD corridor in H2 2011).:

http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&st=0&sk=t&sd=a&start=40#p31020

and gold went to 1550! fantastic: Again, exactly where it was expected to be in this April prediction ( which predicted also the bubble-well I expected it to be there in November) - down to 1500-1600 in November 2011.And I expected bubble and crash in October- it happened in September..

http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&st=0&sk=t&sd=a&start=220#p32176

 

 

Mon, 09/26/2011 - 07:17 | 1710317 oak
oak's picture

Excellent forecast, any new pattern analysis to share?

Mon, 09/26/2011 - 05:36 | 1710244 aleph0
aleph0's picture

1972 .. Millions
1985 .. Billions
2008 .. Trillions
2012 .. QuadZillions

Obviously not a Bubble  ...  Where's that Dr. Evil clip

Mon, 09/26/2011 - 05:43 | 1710252 Zola
Zola's picture

The cheerleaders of this gold and silver market decline are absolute idiots. It angers me to see the manipulation in those asset classes which at the end of the day represent the only safe asset in this environment ( bonds / equities / other commodities / cash ??- please give me a break ) . The washout move in Asia is the impact of the Friday margin hikes and i am quite convinced a lot of short covering at 26 was done by those who started this decline (JPM etc...) .

Mon, 09/26/2011 - 05:49 | 1710256 Isotope
Isotope's picture

I need to check eBay this week to see if the 2013 MREs are going down also. Be interesting if there was a correlation.

Mon, 09/26/2011 - 06:02 | 1710265 Debugas
Debugas's picture

why is www.kitco.com down ? Why does it happen everytime PMs go down substantialy?

 

Mon, 09/26/2011 - 08:11 | 1710438 JonNadler
JonNadler's picture

Cause we ain't got no gold. We have all those pool accounts with no gold in them, you think we are going to give away the few ounces we got left for these prices?

Mon, 09/26/2011 - 06:39 | 1710288 Silverhog
Silverhog's picture

Mish said margin hikes were not the cause of Silver's big dip. I think it's had a big hand in the plunge and this proves it as well.

Mon, 09/26/2011 - 06:40 | 1710289 sudzee
sudzee's picture

Need quick deleverage in paper pm's for the reset. TPTB are moving the game to "bid only" . All trading stops, no hedging, no physical buying or selling. 250.00 gold, 50cent silver, but no physical available, is the setup then printing fiat begins in earnest. Competing currencies are not a good thing.

Mon, 09/26/2011 - 10:04 | 1710962 Smiddywesson
Smiddywesson's picture

Sudzee's got a point.  You are not going to sit out the biggest financial meltdown in human history without feeling some mental anguish.  Be ready to see paper prices decouple from your PMs, and the full power of the banks and media try to coax, shock, and intimidate you into selling your physical for useless paper. 

Jesse Livermore said like he made most of his money sitting on his hands and refusing to react.

Mon, 09/26/2011 - 06:42 | 1710292 rokka
rokka's picture

Silver is done, go home people.

Mon, 09/26/2011 - 07:00 | 1710301 Colonel
Colonel's picture


"Paper money eventually returns to its intrinsic value -- zero." - Voltaire

Mon, 09/26/2011 - 08:28 | 1710467 DosZap
DosZap's picture

rokka,

YEAH, it's done, try buying any,if you can find it.The Indians and Asians are having a frigging picnic.

That 18,000 tonnes India has is growing at a very rapid pace.

Mon, 09/26/2011 - 07:05 | 1710303 Youri Carma
Youri Carma's picture

Gold All Time High History Before April 28, 2011

GOLD ALL TIME HIGHS HISTORY – From Today’s Bottom at $1,536 oz

April 28, 2011 – $1,535.90 oz(for now) – $1,537.40 oz
April 29, 2011 – $1,569.30 oz
May 02, 2011 – $1,577.40 oz
July 13, 2011 – $1,594.90 oz
July 17, 2011 – $1,598.60 oz
July 18, 2011 – $1,607.90 oz
July 19, 2011 – $1,609.55 oz
July 24, 2011 – $1,622.99 oz

------------------------------ Now at this level
July 25, 2011 – $1,624.30 oz
July 27, 2011 – $1,627.73 oz
July 29, 2011 – $1,631.80 oz
Aug 01, 2011 – $1,632.80 oz
Aug 02, 2011 – $1,661.38 oz
Aug 03, 2011 – $1,675.90 oz
Aug 09, 2011 – $1,782.50 oz
Aug 10, 2011 – $1,814.80 oz
Aug 11, 2011 – $1,815.50 oz
Aug 18, 2011 – $1,845.30 oz
Aug 19, 2011 – $1,881.40 oz
Aug 22, 2011 – $1,911.52 oz
Aug 23, 2011 – $1,913.50 oz

Gold Right now at $1622.98 oz http://www.goldprice.org/spot-gold.html

Bottomline: What it took gold to get there in about 2 months is now just happening in a couple of hours lolz!

Mon, 09/26/2011 - 08:22 | 1710460 JW n FL
JW n FL's picture

 

 

These people who have invested their education and life into a LIE of a System.. are fighting common sense on any and all plains possible.

They can NOT! admit the truth to themselves or they would shatter those enormous egos needed to rob others blind.

it ain't easy training to be a psycho! let alone live the psycho lifestyle and the retire as a psycho!

 

Silver Manipulation Law Suit UpDated!

 

http://www.scribd.com/doc/66299520/JP-Morgan-Saxo-Consolidated-Silver-Class-Action-Complaint-09-12-2011

1. 1. Unlawful conduct. “Defendants combined, conspired and agreed to restrain trade in, fix, and manipulate prices of silver futures and options contracts traded in this District on the Commodity Exchange Inc. (“COMEX”) division of the New York Mercantile Exchange (“NYMEX”). Defendants thereby have violated Section 1 of the Sherman Act.

 

Also during the Class Period, certain of the Defendants, including JP Morgan, have intentionally acted to manipulate prices of COMEX silver futures and options contracts.

 

2.2. Purpose and Means. Defendants have effected their foregoing restraint of trade and manipulations in order to profit themselves. Defendants have caused declines in the price of COMEX silver, and COMEX options, and also stabilized such prices through diverse means. These means include (a) a dominant and manipulative short positions and market power manipulation; (b) repeated manipulative and uneconomic trades and trade manipulation; (c) false trades made to facilitate a trade manipulation; and (d) other acts.

 

3.3. Market Power Manipulation. (a) JP Morgan, gradually acquired control, between March 17, 2008 and August 2008, of an enormously large ounce short position in COMEX silver futures and silver that previously was held by Bear Stearns. This short position and JP Morgan’s existing COMEX short silver positions gave JP Morgan substantial market power in COMEX silver futures contracts.

 

4.4.Manipulative and Uneconomic Trades (a) During the Class Period, JP Morgan also made large manipulative trades that repeatedly caused sudden, unreasonable and artificial fluctuations in COMEX silver prices which profited JP Morgan. (b) One of these episodes occurred on August 14 and 15, 2008. JP Morgan’s trades caused a very large decline of almost $1.41 per ounce, or approximately 12%, in COMEX silver futures. This represented an approximately $220,000,000 increase in the value of JP Morgan’s COMEX silver short positions.

 

7.7. CFTC Commissioner Comment (a) Such depressions of the prices of COMEX silver futures through large uneconomic trades created benefitted JP Morgan’s extraordinarily large COMEX short position. (c) Also, these types of trades were reported to the CFTC by other persons. Plaintiffs further specifically allege that Commissioner Bart Chilton made public statements, including on October 26, 2010, to the effect that he believed there had been manipulation or related unlawful conduct in the COMEX silver futures market. “I believe that there have been repeated attempts to influence prices in the silver markets. There have been fraudulent efforts to persuade and deviously control that price. Based on what I have been told by member of the public, and reviewed in publicly available documents, I believe violations to the Commodity Exchange Act (CEA) have taken place in silver markets and that any such violation of the law in this regard should be prosecuted.” Bart Chilton

 

58. 58. JP Morgan executed its trades on this day through, at least, a futures floor broker named Marcus Elias. Marcus Elias was a former classmate and wrestling teammate of Chris Jordan, a senior silver trader at JP Morgan. After the close of floor trading on June 26, 2007, Marcus Elias acknowledged that he had executed purchase trades for JP Morgan at or near the lows of the market. Marcus Elias also executed sell orders on behalf of JP Morgan in the morning, which contributed to the price declines, and then purchased futures on behalf of JP Morgan subsequently as the market bottomed.

 

65. 65. Through its trading conduct on this day, JP Morgan intended to force traders who were short out of the money puts to cover their positions. As options on July futures approached expiration, JP Morgan had no fundamental reason to believe there would be a price move downward. Yet JP Morgan maintained its put positions until the last available day to trade these options - an economically unjustifiable action because at expiration the options would expire out of the money and worthless. However, by virtue of this large put options position, JP Morgan knew that a large and less capitalized segment of the market was conversely short options. So, rather than simply liquidate its out of the money positions at a loss, JP Morgan sold futures into the market and placed “spoof” orders to generate widespread panic. This selling forced panicked traders to systematically sell silver futures. As discussed below, this conduct was repeated again in August 2008.

 

 

100. c. JP Morgan’s Communications with HSBC

 

88. 88. Between 1996 and 2000, Robert Gottlieb, Christopher Jordan and Michael Connolly worked together at the Precious Metals Trading Desk of HSBC and at Republic National Bank of New York, prior to its acquisition by HSBC. 89. In 2006, Jordan began his employment at JP Morgan where, until 2010, he was one of JP Morgan’s principal COMEX silver futures and options traders. 90. After a brief stint at Bank of America as a commodities trader, Mike Connolly returned to HSBC in 2007, where he served as Senior Vice President of HSBC’s Precious Metals Desk. 91. In March 2008, Robert Gottlieb began his employment at JP Morgan Chase where he presently serves as a Managing Director/Trader. 92. Prior to JP Morgan’s acquisition of Bear Stearns in 2008, Mr. Gottlieb had worked for Bear Stearns from January 2006 forward. 93. Bear Stearns, through Robert Gottlieb and others, had developed the previously alleged large Bear Stearns short position in COMEX silver futures prior to March 17, 2008. 94. Contrary to standard antitrust compliance manuals, Mr. Gottlieb regularly spoke to, and communicated and met with HSBC silver trader Mike Connolly from the time that Mr. Gottlieb joined JP Morgan until at least October 2010.

 

500. d. JP Morgan’s Motive and Financial Incentive to Cause Lower COMEX Silver Futures Prices From The Second Quarter Of 2008 Forward.

 

95. 95. By the second quarter of 2008 and continuing thereafter through the end of the Class Period, JP Morgan possessed a large financial incentive to cause lower COMEX silver futures prices. Lower COMEX silver prices caused the mark to market value of JP Morgan’s short COMEX silver positions to increase. The amount of the increase in the value of JP Morgan’s short COMEX silver short positions was at least $100,000,000 and was as much in excess of $150,000,000 for each $1 decline in COMEX silver prices.

 

116. 116. According to other witnesses as well, on or before August 15, 2008, brokers who often executed trades for JP Morgan accumulated a significant number of September puts that were well out of the money. 117. As prices decreased, these September puts became much closer to being in the money. Accordingly, those who had been selling these puts had to close out their positions by buying back the September puts on August 15, 2008. 118. Chris Jordan at JP Morgan was selling back large amounts of September puts on August 15 at an enormous profit.

 

124. 124. In his communications with the CFTC, the whistleblower described how JP Morgan signaled its co-conspirators in advance of the manipulation, so that JP Morgan along with its co-conspirators, could reap enormous profits by artificially and unlawfully suppressing and manipulating the price of COMEX silver futures and options contracts.

 

 

Dear Friend of GATA and Gold (and Silver):

An updated complaint in the class-action lawsuit against JPMorganChase alleging manipulation of the silver futures market, filed this week in U.S. District Court for the Southern District of New York, details the mechanisms of the manipulation and some of the traders executing it.

According to the updated complaint:

-- MorganChase already had a large short position in silver when it acquired another large short position upon the investment house's acquisition of the failed New York brokerage Bear Stearns in 2008. This, the complaint says, gave MorganChase hugely disproportionate influence in the silver market.

-- MorganChase used "fake" and "spoof" trades to manipulate prices downward, particularly in advance of contract expiration dates, when MorganChase held put options, which became more valuable as the price of silver was driven down.

-- MorganChase reduced its short position following the May 25, 2010, hearing of the U.S. Commodity Futures Trading Commission, in which complaints of gold and silver market manipulation figured heavily. (GATA Chairman Bill Murphy and board member Adrian Douglas testified at that hearing and presented a statement by a London silver futures trader, Andrew Maguire, detailing market manipulation he had witnessed.)

-- MorganChase regularly engaged in uneconomic trading activity in silver whose only purpose was price manipulation.

-- The CFTC received a detailed complaint about silver market manipulation from a "whistleblower" (this is presumably Maguire).

--Market circumstances during the period of manipulation alleged by the lawsuit were much different from the circumstances previously investigated by the CFTC when it concluded that there had been no manipulation.

While these are all only allegations, the silver price manipulation case against MorganChase is now extensively detailed with names of participants, specific actions and their dates, and identities of participants. Market experts no doubt will find much more of signifance in the consolidated complaint.

King World News has just published a summary of the consolidated complaint here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/9/16_Id...

The full complaint can be found at GATA's Internet site here:

http://www.gata.org/files/ConsolidatedSilverClassActionComplaint-09-12-2...

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Join GATA here:

The Silver Summit
Thursday-Friday, October 20-21, 2011
Davenport Hotel, Spokane, Washington

http://news.silverseek.com/SilverSeek/1316196109.php

Mon, 09/26/2011 - 07:03 | 1710304 MiningJunkie
MiningJunkie's picture

As soon as Zerohedge goes more than three hours without a gold comment, I will start looking to buy back my pm's probably a lot lower though...

http://thefundamentalview.blogspot.com/2011/09/looking-back-at-last-mont.........

Mon, 09/26/2011 - 08:26 | 1710464 JW n FL
JW n FL's picture

 

 

Ya! all those Mining Stocks are sooooooooo cheap and the upside is sooooooooooooooooooooooooooooooooooo great, maybe.. if they EVER would pay! WHICH! they do NOT! EVER IN HISTORY!!

now you have ALL of history and ANY! mining stock to prove me wrong..

I will be waiting for you to show US 1 winner!

Now fuck off and back to under your rock from whence you scurried.

Mon, 09/26/2011 - 10:17 | 1711005 Smiddywesson
Smiddywesson's picture

Wow JW, how do you really feel?  LOL

I steer clear of the miners too.  Their prices are even easier to manipulate than paper gold and silver.  They are ok to trade because of the volatility, but any fundamental buy and hold strategy can get you into trouble with all the naked shorting and manipulation.

Mon, 09/26/2011 - 07:05 | 1710305 mesje
mesje's picture

Youri Carma: ...eee... point being ?

Mon, 09/26/2011 - 07:31 | 1710334 Youri Carma
Youri Carma's picture

This is the point: What it took gold to get there in about 2 months is now just happening in a couple of hours lolz!

To spell it out for ya  V O L A T I L I T Y - This gold bash means notin if it can go up this quick

And point being: St Patrick's D'aquí ve which is my holiday. Point being: Bring The Gold! http://www.youtube.com/watch?v=_qO66Rmi1Mw

Mon, 09/26/2011 - 07:10 | 1710310 andthensome
andthensome's picture

does anyone even care about palladium?

 

Mon, 09/26/2011 - 08:52 | 1710526 Negro Primero
Negro Primero's picture

not me, but here you have it:

"For Palladium, the drop below 629.25 has paved the way for further losses towards 574.26, 61.8% retracement level of 396.25-862.25 rally. A break below this level would signal extension of the downtrend. A violation of 574.26 would open 541.00 and 506.23, 76.4% retracement of the same rally. Initial resistance is at 645.50, the intraday high.>Bearish"

Mon, 09/26/2011 - 08:54 | 1710538 DosZap
DosZap's picture

Palladium?.

Not me, cars and diesels are not going to be in vouge,when China crashes like a SOB.

I forsee an over supply of it when the vehicles stop being built(however some are using it as jewelry).

Do NOT follow this link or you will be banned from the site!