They’re back! Many of us thought that with all the hype and misinformation spread around the Internet early last year on silver being thoroughly exposed as pure nonsense, the discussion on precious metals markets would return to common sense. Seems like it has been a long time since we heard talk of 80% premiums to cash settle on Comex, silver coin dealer inventories being wiped out, panic in the halls of Comex due to impending collapse, midnight meetings by the Cartel, the Pan Asian Gold Exchange to crush the Cartel, a run on Comex inventories, secret derivative liabilities that would bankrupt JP Morgan and viral videos of talking flatulent bears (I’m sure I’m still missing a few). But unfortunately, that doesn’t appear to be the case.
ZeroHedge, perhaps the greatest merchant of misinformation on silver in the world is at it again with a post today entitled “Physical Silver Surges to Record 30% Premium over Spot, In Backwardation”. As one who deals in precious metals on a day-to-day basis, that was news to me. Today I was seeing 100oz bars trading for less than 4% over spot, maple leaf and phils for 8.5% over and eagles for 11%. That’s retail - size transactions would be at a discount to those prices. If one were interested in junk or scrap silver, the price would be even less. Silverware can be had at spot and junk silver coins at slightly under spot - all at any size. Likewise, exchanges for physical (EFP) can be had at a slight DISCOUNT. That is, one could trade their futures for physical at a price lower than contract.
So where’s the 30% premium for physical? Oh, it’s not physical at all. It’s the premium to NAV for Sprott’s silver ETF! From the post:
And for a good sense of what the “real” price of the metal is, not one determined by institutions whose interest it is to preserve the hegemony of paper, one can either try to procure gold and silver at a retail merchant, or one can look to the premium of a dedicated physical ETF over spot. Such as Eric Sprott’s PSLV which as of today is trading at an all time high premium of 30%! In other words, someone is willing to pay up to 30% over spot for the right to be closer to the physical metal than merely have a paper claim on a paper claim (pre hyper rehypothecation and what not).
How is that physical? An ETF is a stock. It’s a piece of paper that says you own an interest in an entity that owns some physical silver. That paper can be borrowed, lent, hypothecated and re-hypothecated a million times, just like any other stock. So in ZH land, physical isn’t physical, paper is physical. Not all paper, only paper issued by one entity - Sprott. Coins aren’t physical, bars aren’t physical, silverware isn’t physical - the only physical silver in ZH’s mind is the Sprott ETF. (Sure, ZH did note something about "coins" above but obviously did not inquire with any physical dealers).
I’ve wondered for a long time how ZeroHedge can continue to produce articles on gold and silver that are so wrong on so many levels. Tyler Durden is an intelligent person, who surely has the capability of reporting responsibly on issues impacting precious metals industry. But he still posts misinformation such as the above on a regular basis. Does he care about his credibility? Is he just trolling for clicks? Or perhaps is he just being paid to post such articles? Are entities such as Casey, Sprott, GATA etc, giving ZeroHedge money for propaganda?
Enquiring minds want to know.