Bob Coleman: Is The Silver Squeeze Over?
Tom welcomes Bob Coleman back to the show, and he brings his insight into the precious metals space and outlines the overall complexities of the futures markets.
The Comex had a lot of metal coming onto the exchange last summer because premiums were high. He explains how the arbitrage market has changed at the Comex and why a lot of metal is coming off the market.
He explains backwardation in the futures market and the various terms like open interest and eligible that the Comex and the LBMA utilize. The CME group has a delivery report that shows how many warrants change hands; this report has nothing to do with physical bars’ movement. The warehouse stock report is a better indicator as it shows the actual movement of metal.
The Comex still has metal, but outflows have increased, and in some cases, it’s taking a bit longer to get delivery. Significant demand from ETF’s has put stress on participants, and therefore the lease rates have moved higher.
Jeff Currie’s comments on his recent CNBC interview may have been misunderstood since ETFs aren’t legally allowed to trade on futures markets. However, the authorized participants who deliver metals to the exchanges could be holding futures for the metal, either long or short.
He explains some of the differences between the regulations for the Comex and London Vaults.
There are several differences between holding physical metal yourself and having shares in an ETF. Consider holding metal yourself. ETFs are convenient, but most investors don’t realize that you have no claim to the underlying physical metal. Also, your shares may be controlled by other entities that could become insolvent or force you to settle in cash.
Bullion premiums are so high that some investors may be taken advantage of by dealers. He encourages investors to shop around especially considering that you will probably be waiting several weeks to get delivery. Silver premiums on some items may be high due to a lack of supply of specific products. Currently, there are minimal physical sales back onto the market.
Time Stamp References:
0:00 – Introduction
0:32 – Comex Arbitrage
2:25 – Futures Backwardation
3:22 – Comex/LBMA Terms
5:27 – Comex Squeeze & Demand
7:46 – Silver Product Demand
9:07 – Tightness Vs. Shortness
10:29- London Lease Rates
12:20 – Bobs Recent Article
14:02 – Jeff Currie’s Comments
16:24 – ETF’s & NAV
17:23 – LBMA Custodian Concerns
19:26 – Physical Vs. ETF Shares
23:21 – Physical Dealer Premiums
28:14 – Liquidity & Exiting
31:00 – Wrap Up
Talking Points From This Episode
- Comex and premiums in futures.
- Understanding Comex reports and terms.
- Benefits of holding meta yourself.
- Bullion premiums and high demand Mint products.
Bob Coleman is a Registered Investment Advisor since 1992. In 2001, he founded Profits Plus Capital Management, LLC (RIA) and Dollars and Sense Growth Fund. Recognizing the necessity for physical metal storage, he founded Idaho Armored Vaults and Gold Silver Vault in 2008. They are a distinguished and respected leader in the precious metals industry specializing in storage, transportation, shipping logistics, and security.