At what spot price might dealers stop selling physical silver?

[universalcurrency]

Hi

Apologies if anyone has asked this before.... As silver seems to be going down (probably due to paper contract shorting) what spot price if any do you think that dealers might stop selling or increase there premiums considerably over spot?

Being a newbie I have no idea of the cost of mining, refining, storage, above ground deposits etc, so presumably, dealers prices could uncouple in relation to the spot price?

[Lowlow]

In the aftermath of 2008 silver's spot dropped dramatically and the premium over spot for generic rounds was somewhere around 5+ $us/toz, and that didn't change for a while.  It took bouncing around on the bottom and establishing a range for a few months before the spread narrowed and the premium over spot became something close to spot price, at least that's how I remember it.  Right now the spread is fairly tight and the premium over spot for generic rounds is around less than 1$us/toz.

To say all of that another way, when the spot price initially took a dramatic nosedive in the aftermath of 2008 the actual physical price barely changed, and that showed up as an ever increasing premium over spot.  It took a while before the people with physical started to trade at lower prices.

Edit - I remember rumors of people taking physical delivery on comex bars because that's the only way they could lock in the spot price.

Edit #2 - I also remember bullion dealers simply not having any inventory on a lot of items that only weeks before were readily available.

Edit #3 - I also remember a question being tossed around, "What happens to the futures markets when the warehouse is empty ?" and people closely watching comex warehouse inventories.

[Stu]

Reapers hedge their position so as long as they can get the goods they will sell as long as there is buyers. I wasn't in the game in 2011 when peak prices were reach e but others have said the market here was buoyant. 

[Scuzzle]

It's not the dealers but the miners I can't understand, with the access to incredibly low interest money nowadays I don't understand why the miners don't use this to keep going if they need to and just hoard and stockpile the silver they mine for themselves,  if they all got together and did this they could force a much better rate for themselves from the manipulators.

[Lowlow]

1 hour ago, Scuzzle said:

It's not the dealers but the miners I can't understand, with the access to incredibly low interest money nowadays I don't understand why the miners don't use this to keep going if they need to and just hoard and stockpile the silver they mine for themselves,  if they all got together and did this they could force a much better rate for themselves from the manipulators.

I'm not sure what you meant, Scuzzle, could you explain it a little more .. sounds like an interesting thought ..

[Scuzzle]

6 hours ago, Lowlow said:

I'm not sure what you meant, Scuzzle, could you explain it a little more .. sounds like an interesting thought ..

If all the silver miners got together and agreed not to pass on their silver and just sat on it instead they would change the silver price.  You can borrow money for next to nothing nowadays so borrow to make up any shortfall in your everyday running expenses and you will more than make back what you need to repay it when the silver price rises, they would force the maniplators into it.  THe difference in getting a fair price for their efforts compared to a bare minimum should make a world of difference to their operations.

[Stu]

That's a workable plan I would say @Scuzzlehowever Keith what's his name from first majestic proposed something similar but the other ceo's sat on their hands. I think they get massive kickbacks individually and don't care anything for company, employees or those with a stake in organisation. 

[Lowlow]

3 hours ago, Scuzzle said:

If all the silver miners got together and agreed not to pass on their silver and just sat on it instead they would change the silver price.

In the U.S. this is called horizontal price fixing and can get you 1-5.

3 hours ago, Scuzzle said:

You can borrow money for next to nothing nowadays so borrow to make up any shortfall in your everyday running expenses and you will more than make back what you need to repay it when the silver price rises, they would force the manipulators into it.  The difference in getting a fair price for their efforts compared to a bare minimum should make a world of difference to their operations.

I'm sure a lot of miners do this, running on debt if they think the price will recover, but I guess it depends on how long that is going to take.  I remember in the 1990's that took over a decade, a long time to expect the bank to keep putting food on your worker's tables.  In a way what you're talking about is not even specific to miners, anyone could borrow (home mortgage for example) and buy silver, futures on silver, options on futures on silver, etc, and speculate in the market, you don't have to be a miner to do that.