Silver trading at $26

[Lovecraftian4Paul]

Interesting times for silver, to be sure. I still hope this dip will continue for buying purposes, but it feels like it may shoot back up pretty fast based on what happened today.

 

[Schiff_FTW]

 

[2young2vote]

I've always wondered how silver sellers (like Monarch Precious Metals) deal with dramatic reductions in value like this. Does anyone know? Does it have something to do with LIFO? I'm in my third accounting class right now and all I can think of is LIFO vs FIFO, but I'm sure there is more to it and it might not have anything to do with LIFO and FIFO. Do they just stop selling until it goes back up? Please explain, I'm very interested in this.

 

[cubical]

I've always wondered how silver sellers (like Monarch Precious Metals) deal with dramatic reductions in value like this. Does anyone know? Does it have something to do with LIFO? I'm in my third accounting class right now and all I can think of is LIFO vs FIFO, but I'm sure there is more to it and it might not have anything to do with LIFO and FIFO. Do they just stop selling until it goes back up? Please explain, I'm very interested in this.

I am sure they have account where they hedge and simply make the spread.

 

[Joshua2585]

Wow... listen to John Hathaway and goldsilver.com praise the Fed intervention in the PM markets by printing more money!!! I find all this financial talk extremely fascinating, but I have to admit that I have a very limited understanding of it all. Someone mentioned earlier that the Shanghai Exchange dumped a bunch of silver or something to that effect. Could someone share with me what exactly is going on? I was trying to find additional sources of what was going on in the market, without much luck.

http://goldsilver.com/news/john-hathaway-here-is-why-gold-and-silver-have-bottomed/

 

[Dr.3D]

I've always wondered how silver sellers (like Monarch Precious Metals) deal with dramatic reductions in value like this. Does anyone know? Does it have something to do with LIFO? I'm in my third accounting class right now and all I can think of is LIFO vs FIFO, but I'm sure there is more to it and it might not have anything to do with LIFO and FIFO. Do they just stop selling until it goes back up? Please explain, I'm very interested in this.

This article might help.
http://silverstockreport.com/2011/silver-price-changes.html

 

[Cutlerzzz]

My wife who does our household groceries shopping told me how prices have just spiked on everyday items.

What does your other wife do?

 

[Seraphim]

Just like food commodity producers, they are vested in the futures market by selling future production at contractually agreed upon levels. By doing so they may miss out on huge upswings in prices, but like all rational businesses they are more concerned with longstanding profitability then irrational greed.

If long term fundementals indicate that a 50% rise in an assets price is very likely, the futures market and buyers of future production will look for producers/sellers willing to negotiate prices that work for both sides. There is no garuntee such a price increase will occur, so the contract may stipulate sales at only 10% higher then current market prices. So long as the company/producer has a good business model, selling at current market prices will usually sustain the business, let alone a 10% increase in the sale price. From the buyers perspective, they may feel as though that 10% above current market rates for future production is a steal.

That's how businesses and investors balance current prices with future risk.

That's a simplistic explantion.

In the silver market, the cost to produce 1 ounce of silver, for most established miners, is much lower than current spot price. A LOT of their future production is already bought and paid for in a manner that allows them to operate in a longstanding manner, while also attracting investors to purchase said production in a way that satisfies those investors outlook (whether bearish or bullish).

Does this help at all?

I've always wondered how silver sellers (like Monarch Precious Metals) deal with dramatic reductions in value like this. Does anyone know? Does it have something to do with LIFO? I'm in my third accounting class right now and all I can think of is LIFO vs FIFO, but I'm sure there is more to it and it might not have anything to do with LIFO and FIFO. Do they just stop selling until it goes back up? Please explain, I'm very interested in this.

 

[simon1911]

What does your other wife do?

The other wifes are busy campaigning for Ron Paul, of course.

So someone I know bought a bunch of British Sovereign gold coins a while back to hedge against the upcoming zombie apocalypse. Does anyone have recommendations on whether this person should go to any silver or not? If so, which specific coins? This person have great concerns about government confiscations so he prefers keeping them with the same numismatic value.

 

[enjerth]

Wow... listen to John Hathaway and goldsilver.com praise the Fed intervention in the PM markets by printing more money!!! I find all this financial talk extremely fascinating, but I have to admit that I have a very limited understanding of it all. Someone mentioned earlier that the Shanghai Exchange dumped a bunch of silver or something to that effect. Could someone share with me what exactly is going on? I was trying to find additional sources of what was going on in the market, without much luck.

http://goldsilver.com/news/john-hathaway-here-is-why-gold-and-silver-have-bottomed/

I read that and thought it was a pretty funny joke.

 

[2young2vote]

Just like food commodity producers, they are vested in the futures market by selling future production at contractually agreed upon levels. By doing so they may miss out on huge upswings in prices, but like all rational businesses they are more concerned with longstanding profitability then irrational greed.

If long term fundementals indicate that a 50% rise in an assets price is very likely, the futures market and buyers of future production will look for producers/sellers willing to negotiate prices that work for both sides. There is no garuntee such a price increase will occur, so the contract may stipulate sales at only 10% higher then current market prices. So long as the company/producer has a good business model, selling at current market prices will usually sustain the business, let alone a 10% increase in the sale price. From the buyers perspective, they may feel as though that 10% above current market rates for future production is a steal.

That's how businesses and investors balance current prices with future risk.

That's a simplistic explantion.

In the silver market, the cost to produce 1 ounce of silver, for most established miners, is much lower than current spot price. A LOT of their future production is already bought and paid for in a manner that allows them to operate in a longstanding manner, while also attracting investors to purchase said production in a way that satisfies those investors outlook (whether bearish or bullish).

Does this help at all?

Yes, Thank you. I was just confused because Monarch Precious Metals buys back their brand of silver at 99% of spot price and if they had bought a bunch at $40oz then they would have lost out. But that is probably a small part of the business, they probably buy a majority of their silver using futures prices.

 

[Joshua2585]

So... essentially a drop then $8.00 per oz. rise in prices. If I was lucky to have 10k to invest in silver yesterday, then I could have made an $80,000 profit? Is that simplifying it too much? All this finance talk has really got me going. I am feeling like I should go back to school and get a 2nd degree, this time in finance. It has me sitting here wishing that I had more liquidity. There were probably a lot of people that got very rich yesterday. lol

 

[Austrian Econ Disciple]

So... essentially a drop then $8.00 per oz. rise in prices. If I was lucky to have 10k to invest in silver yesterday, then I could have made an $80,000 profit? Is that simplifying it too much? All this finance talk has really got me going. I am feeling like I should go back to school and get a 2nd degree, this time in finance. It has me sitting here wishing that I had more liquidity. There were probably a lot of people that got very rich yesterday. lol

No. In order to get 80,000$ from 10,000$ you would need a 800% increase in price. I really don't feel like doing the math right now, but if you had 10,000$ you would have made about 2700$ if you bought on the dip.

 

[Joshua2585]

Ya, after reading your post, I see how I could have totally jacked the math up there. I need to go and try to google a formula for calculating that. So, if it went from 20 to 28, that is a 40% increase? Anyway, I will mess around with the math and try to sort it out. Thanks for the response!

 

[Gideon]

So did anyone actually lock-in any physical silver at $26?

I didn't think so...

$32 per ounce is more realistic, and still a good deal, IMO.

 

[pmbug]

$26 was hit at like 4am CST. Not too many peeps were awake when it happened.

 

[Dr.3D]

Ya, after reading your post, I see how I could have totally jacked the math up there. I need to go and try to google a formula for calculating that. So, if it went from 20 to 28, that is a 40% increase? Anyway, I will mess around with the math and try to sort it out. Thanks for the response!

Yep...

http://www.percent-change.com/index.php?y1=20&y2=28

 

[cubical]

So did anyone actually lock-in any physical silver at $26?

I didn't think so...

$32 per ounce is more realistic, and still a good deal, IMO.

I picked up 10 Canadian Maple Leafs for $30/oz at bullion exchange.

 

[devil21]

The bottom looks like $30 to me. Silver may dip a hair below on and off during the volatility but it goes right back up to $30 quickly after. Im calling $30 the bottom.

 

[Lovecraftian4Paul]

Anything below $40 screams B-U-Y to me, in the most vivid flashing letters you can imagine. Silver is going all the way to $50 per ounce, and hopefully well beyond that.