Quote Originally Posted by valerb View Post
I'll address a couple things. Anyone paying a 40% premium for an ASE has been bitten by the ASE love bug, which would be $9.60 each with the spot price at $24. That's simply throwing your money down the drain and the chances are, you'll never recoup that kind for premium payment.

Why would anyone pay those kinds of prices, when they can buy an ASE at the single price range, with a premium of $7 at APMEX, $6.10 at Provident and only $4.55 at Gainesville? Just because some people don't know any better, does not make the premiums of 40% the true going rate. Maybe on an average between LCS's, but who buys there products at an LCS when they know they are the highest prices in town. Keep in mind that the premiums I mentioned above are for a single ASE, so if you can afford larger quantities, the premium come down from there. As I've said before, this is not the time to be waiting in line for a grossly overpriced ASE, when you can buy generic products for a fraction of those premiums. The premiums on ASE's will come down, but they are not going to give anyone a rebate on the excess they paid. It also doesn't make sense to wait for the ASE premium to come down as the spot price could be $10 higher. However it does make sense to buy generic products that have not skyrocketed in price in the mean time.

There is nothing mysterious about the spot price being down and the US Mint and dealers scalping the public on premiums for ASE's. The public stands in line to buy the new ASE's every year, nothing new. However, with the spot price crashing and the normal demand exceeding the US Mints capacity to produce them, has only been exacerbated by the publics desire to take advantage of the lower spot price and buy even more. Which only creates an even greater opportunity for the dealer to scalp the public for even higher premiums. When you look at the premiums charged by APMEX at $7 and then only $4.55 at Gainesville, you have to realize it's nothing but pure greed for everyone who can cash in on it. While thousands have been waiting for the next release of ASE's, there has been ample supply of generic Silver to be had at far more reasonable prices.

As far as the Gold and Germany is concern. There has been about ten different versions of that story and who knows if any of them are true except that Germany wants part of their Gold returned in seven years or so the story goes.

Who says that they are not delivering Gold, other than some analyst that are always repeating these same lines of BS. If these stories were actually true, then COMEX would have folded years ago from default.

I look at the COMEX delivery reports daily and there is no indication that deliveries are not being met for Gold. Not only have they been delivering Gold, but the deliveries scheduled for Tuesday April 30,2013 are for 562 contracts which equals 56,200 ounces of Gold and that will make a total of 1,163,200 ounce delivered for the Month of April. Where is any proof that Gold is not being delivered, other than in some analyst story line to convince people to run out and buy more Gold before it's too late??

The COMEX warehouse inventories have been declining over the past four months by over 3 million ounces, that alone should tell concerning minds that Gold has been delivered. But they did manage to actually increase the Gold holdings at COMEX on Friday by 153,748 ounces and are now once again back over 8 million ounces in total. Which is a far cry from collapsing.

Mike you've been around for a long time, how many times have you read this same information regarding COMEX not delivering Gold or Silver?

I can't disagree with the comments about how COMEX handles those margin calls with no definite pattern for those increases. Especially when they did five in a one week period and the price collapsed from it's peak.

However I don't agree with the concept that the margins should rise with the price and fall when it declines. It's a bit more complicated than that. That's only looking at the market from one side, but the market swings in two directions and as that pendulum swings it is taking someone down with it.

I can understand why they implement these margin increases, but why do they always increase it for everyone at the same time, when only some investors are putting their broker at potential risk?

They are suppose to be put in place to protect the brokers, as they are ultimately the ones that are on the hot seat for any contract defaults. However, what is the logic to add a margin increase to both sides of a contract when the price is swinging in one direction only. That is, if the price is rising, you might need to have the short contract holders margin increased to protect the broker, but it makes no sense to increase the margin of the long contract holder. Likewise, if the price is in decline, you might need to increase the margin for the long contract holder and it would make no sense to increase the margin for the offsetting short contract.

I would agree that margin increases should be based on price movements and percentage basis "if" they are running against the contract holder and they should be returned if those movements turn the other way in favor of the investor. This should be a two way street for the Long and Short contract holders, but not both paying the same penalty because one side is in trouble. What's the logic of increasing a margin for someone that bought a contract at $24 and the spot has jumped to $44, none whatsoever, but the problems are many for the poor slob that bought the short offsetting contract at $24. With a huge swing in the market like this, the short contract holder should probably have seen two or maybe three margin increases at a minimum and none for the Long contract holder. But those margin increases should only have kicked in on an individual basis as the price swings became a greater percentage from the original contract price and not for all short contract holder equally. It should all depend on where you entered the market, not where someone else did. Likewise when the market takes a dive, a long contract holder shouldn't be hit with a margin increase if he is still in the black with his contract, just because many others are going deep into the red.

I know, there is more to the story, like volatility. That's a lot of hog wash and someone that is holding a contract that is well in the black should not be bothered by any such nonsense. And that goes for all those short contract holders that were hit with a margin call because of the price declines in their favor.

Margin calls are justifiable, but there should be set procedures for them that every investor knows when it's coming in relations to "his/her" contract and only if the market is going against them and those margins should be returned if the market swings back in the opposite direction. It's not as if this would be some major paper work nightmare for the brokers, as they have computers to access the customers accounts to shuffle the margin call money back and forth at virtually no cost to them. If a customer doesn't have enough funds to meet the margin call, then let the broker charge a small fee for having to manually deal with that customer.

Use margin calls to protect the brokers at a constant and fair rate, but don't use them to control the market at will and no one can tell me that hasn't happened. Just remember April 2011!!! It wasn't just the long contract holders that suffered all those rapid fire margin calls, everyone did as a result except the short contract holders or at least the short contract holders that could meet the margin calls.
Thanks Val. Very insightful indeed! But you don't deny that there is significant physical demand for coins and small bars. Even $5 for an ASE is a big premium compared with the norm. But this may be a temporary shortage, just like grocery shelves are bare before a hurricane. That does not mean there is a national food shortage. But the overall trend is pretty clear. More and more investors are becoming aware of the difference between paper and physical metal and are demonstrating a preference for physical. That will eventually have an impact.
We don't know if Western central banks have leased much gold. We are in the dark on that. But the whole point of a Ponzi scheme is to preserve normalcy as long as possible even though the underlying situation is dire. We don't know if this is the case with the precious metals. Frankly I don't care. I do know the West's monetary base is out of control. No argument there. As long as money is being printed in these quantities I am happy to continue to own the metals on a 10 year view. The 10 year US T Bond gives you a return of 18%, interest re-invested, pretax, in 2023. I will take silver and gold over that any day of the week. And a ten year bond is ten year money. That is my comparison. Gold is a store of value, in effect sound money, not an "investment". For an investment you want to own equities and real estate IMHO not metal.