So, in the last year I have dumped years’ worth of financial and economic data into my head. Last December I bought my first silver, and about 2 weeks ago I found your site via ZeroHedge.com. I think from day 1 I started checking your site every couple hours. (Okay, enough with the boot kissing on to my question) I am trying to understand the silver market and what goes into the price (manipulation and all) but I believe I’m lacking a critical component, so bluntly, what is the difference and implications of registered vaults and eligible vaults?
Thanks Doc
Great question Jeffrey, and one that likely many readers have as well.
The Eligible category means that the silver meets the exchange requirements. Exchange requirements include purity, size (eligible silver bars must weigh within 10% plus or minus of 1000 ounces), and also must be from (stamped with) an exchange approved refiner.
Eligible silver essentially means that the silver is stored in COMEX warehouses, and conforms to exchange standards. It is being stored in the COMEX warehouse for a private party, but it is NOT available for delivery to contracts.
For example, Warren Buffet decides to store 30 million ounces of silver owned by Berkshire Hathaway (he has no intention of making the silver available for sale at current prices) in a COMEX vault rather than his Omaha basement, he could do so, and the silver would be eligible inventory.
Registered silver means that the silver is fully available for delivery to longs who stand for bullion delivery.
Registered silver used to have a paper bearer warrant attached for delivery, but these paper warrants are reportedly being phased out.
To simplify, registered silver is deliverable- or available for delivery to a long standing or demanding bullion delivery.
Eligible silver can become registered, and vice-versa. (i.e. the owner can decide to make his silver available for sale at a certain price)
This is seen almost daily in the adjustments section of the COMEX inventory data reports.
In order for eligible silver to become registered, the owner must have an exchange licensed depository (Brink's, The Delaware Depository, HSBC, JPM, or Scotia Mocotta) issue a depository receipt (warrant).
In addition, the bars must total 5,000 ounces (size of 1 contract) plus or minus 6%.
As far as the silver manipulation and the dwindling COMEX silver supplies, registered and Total COMEX inventories have been substantially decreasing over the past few years. Just in the last few years registered silver has declined from 70 million + ounces to 33 million ounces (touching a low of 25 million oz in July), and Total inventories have declined from 140 million oz + to ~ 100 million oz. Eligible inventories meanwhile have been increasing.
The most emphasis on COMEX silver inventories is placed on registered, as technically, this is the only silver that is available for delivery to longs. Theoretically, if 34 million oz worth of longs stood for delivery in September, the COMEX would default, as only 33 million ounces of registered silver remain.
In actuality however, I believe that the TOTAL silver inventories are what matters. Eligible silver supplies meet exchange requirements- they are simply not currently offered for sale by the owners. Clearly this silver would become available at a certain price. I also believe it likely that the owners would likely be strong-armed or forced into converting their eligible supplies into registered should things become desperate for the cartel.
I hope I have been successful in clarifying the differences between the COMEX eligible and registered categories for you. Continue to keep an eye on both registered and total COMEX inventories for signs of the impending COMEX silver default finally coming to fruition.
-Doc
5 comments:
I too did not know the difference... Excellent and thorough explanation... Thanks!!
you know we think of things and how when we see those things it changes, it is hard to believe that man can be so evil and treat people like they do, we are living in a time where the doctrine of the rich wishes to enslave the non believers, the fancy car the 4 bedroom house,50 inch LCD Tv ! what the fu** is all that about ?? for those that are on this site it would be nice to think that we have been there and lived the bullshit lie they have thrown apon us and by way of mainstream owned media they think they can control our lives. It will be nice to think that everyone here believes in the purpose of holding silver, it may not work, and even if it does the scum will still find a way to live among us and one day it may all begin again. Like the monkey with the bat, I say Fuck You...
Excellent explanation Doc
Jeff, Great job of explaining! The more people understand, the more they are likely to buy, as they should, for their own benefit.
As the financial system is exposed, Silver may be the best opportunity to protect ourselves.
Can one demand physical by "standing for delivery" on the COMEX?
This cftc rule since 2005 suggests a gold etf is just fine for settlement of the gold contract. (and the gld etf prospectus allows settlement in cash) Base rule is CFTC Exchange Rule 104.36
http://www.cftc.gov/files/submissions/rules/selfcertifications/2005/rul021805nymex001.pdf
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Harvey Organ picked up the Max Keiser interview with JS Kim
http://harveyorgan.blogspot.com/2011/06/massive-drain-of-comex-silveralmost-all.html
Kim asserts that (on a given period)...
The gold settlements have been as follows:
1. cash .01%
2. physical settlements only .27%
3. 78.22% Exchange for Physical receipts.
4. 21.5% Exchange for Physical swap receipts.
total paper: 99.72%
For silver:
1. cash .19%
2. for physical delivery: .93%
3. EFP (exchange for physical) = 85.39%
4. EFS (exchange for physical swaps+ 13.49%
total paper settlements in silver: 98.88%
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This indicates to me that "standing for delivery" isn't enough to guarantee the stander will get physical. Any evidence that I'm mistaken? (Nick Elway at tfmetalsreport.com)
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