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Awoke
13th April 2010, 09:34 AM
After seeing the manipulation continue, I was looking at the chart and thinking about it.
Then I realized that I don't know what it really represents. I watch that chart everyday, and hope to see it shoot to the moon, but what does it mean?

Does that chart represent the banks buying and selling holdings, or J6P buying and selling holdings.

If the chart is driven downward like today (or in any direction for that matter), does that mean that the big banks are selling off and Joe is buying, or Joe is selling off and the banks are buying?

Why does the effing chart even move at all, really? If someone is selling the silver, that means someone else is buying it, and vice-versa.

I know these are noobish questions, but I'm a prepper, not an economically-minded market sleuth.

Any answers?

Awoke
13th April 2010, 11:38 AM
Seriously. No takers?

gunDriller
13th April 2010, 12:19 PM
i think the Kitco price represents a composite market price that reflects physical gold (and silver) flows along with paper gold (and silver) influences.

i notice some dealers take the Kitco price and add on a few $ for their own Bid prices, and a bit more for their Ask price.

Saul Mine
13th April 2010, 03:11 PM
There doesn't seem to be any clear explanation of what the spot price means or should mean. You might have noticed that all the dealers have different quotes, maybe as much as ten cents different. I have seen an attempt to explain how the spot price is determined, something about a combination of the nearest month future price and the price for immediate delivery, but those markets typically do not require or expect delivery of actual metal, and nobody knows who does the computing. The only price set by identified people is the London Fix, which is negotiated by a small number of dealers for the purpose of settling their accounts, still assuming no delivery of actual metal.

Awoke
14th April 2010, 11:34 AM
Thank you.

Ash_Williams
6th May 2010, 03:31 PM
Picture being in a market in person with some other silver buyers and sellers.

If someone wants to buy, they put out an offer.
"I'll pay 17.60 for 1 oz silver."
That offer gets accepted, or it expires. Offers expire when they are withdrawn ("forget it, I don't want it anyway") or when the market closes for the day.

If the offer was accepted, the last traded price of silver is recorded at 17.60 and everyone in the world watching the kitco chart sees it go to 17.60.
If not, the bid price is 17.60.

If someone wants to sell...
"I'll sell 1 oz for 17.70"
If that offer is accepted, the last trade is 17.70.
If not, the ask price is 17.70.

There would then be a bid of 17.60 and an ask of 17.70.
If someone else says they will sell for 17.65, the bid is now 17.60 and the ask is 17.65. Usually the prices are very close to each other. The larger/more liquid the market, the less the spread between the bid and ask prices.

If you walk into that market with your oz and you want to sell it, you can do so immediately for 17.60. Or you can say you won't take less than 17.62.

If you walk in and want to buy, you can do so immediately for 17.65.

Of course in reality you can't just walk in, and also you're trading much more than 1oz at a time (I believe 1000 oz minimum). It is faster paced than what I described and the transactions and bookkeeping is done by computer.

On your kitco quotes the markets being watched are likely the london bullion market, new york mercantile exchange, and tokyo commodities exchange. The price you see is the cost per oz agreed upon in the last transaction on whatever market kitco is looking at at the time. Sometimes you will see a flat line on the chart for a while that is the result of none of the markets being open at the time.

The spot price is silver for immediate delivery. Silver also trades with futures contracts for slightly different prices on different markets and you'll have a different chart for that. Silver trades on the forex (currencies exchange) market as well, again with slightly different prices.

Awoke
7th May 2010, 05:00 AM
Awesome post, Ash.

Thank you so much for making an effort to sum it up concisely.

*Beer-Cheers Emoticon*