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Old 03-22-2012, 01:17 PM   #21
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I suspect the recent rise in lease rates is a corroborating indicator here. "Brilliant" summer coming?
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Old 03-22-2012, 01:42 PM   #22
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Originally Posted by PMBug View Post:
I suspect the recent rise in lease rates is a corroborating indicator here. "Brilliant" summer coming?
To early too call. March futures settle in one week. We'll see what happens when contract roll over to the next month. Sometimes the front month just shifts in to backwardation shortly before futures expiry. I have no explanation for that.
The short end of the futures curve (the upcoming months april-july 12 : http://www.cmegroup.com/trading/meta...es_globex.html ; look at prior settle to get an accurate picture!) is on the verge of backwardation right now. So something is clearly going on.
It's certainly not bearish, like the natural gas curve which is in deep contango.

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Old 03-22-2012, 01:43 PM   #23
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Originally Posted by PMBug View Post:
I suspect the recent rise in lease rates is a corroborating indicator here. "Brilliant" summer coming?

Well.. Recently it has been the case that price has risen to correct this issue. However, I do think there is a question of whether or not delivery of gold/silver will actually be made at settlement, so we might not have people doing the arb for that reason. Why would you sell physical to buy the contract? Gain 3% more paper but risk not getting your metal back?
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Old 03-22-2012, 01:54 PM   #24
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Originally Posted by dereksatkinson View Post:
Well.. Recently it has been the case that price has risen to correct this issue. However, I do think there is a question of whether or not delivery of gold/silver will actually be made at settlement, so we might not have people doing the arb for that reason. Why would you sell physical to buy the contract? Gain 3% more paper but risk not getting your metal back?
A trader at a tbtfb would do that. The only thing he cares about is his quarterly bonus.
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Old 03-22-2012, 02:01 PM   #25
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Originally Posted by swissaustrian View Post:
A trader at a tbtfb would do that. The only thing he cares about is his quarterly bonus.
Yeah but would the trader actually have any silver to sell? The main reason why backwardation matters is that the arb has to sell physical and buy paper. That is a losing battle in the long run and seems pretty risky to me.
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Old 03-22-2012, 02:15 PM   #26
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Originally Posted by dereksatkinson View Post:
Yeah but would the trader actually have any silver to sell?
Most big banks offer unallocated pm accounts for customers which are backed by a fraction of physical. The traders of the banks use the customer assets to gamble, that's an on open secret. In some cases, this is even legal (e.g. in the UK) unless explicitly excluded by individual contract. So I guess this is almost certainly happening.
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