An ounce of silver is now worth more than a barrel of oil | Hacker News Reader

An ounce of silver is now worth more than a barrel of oil

wsj.com

101 pointsbookofjoe107 comments

I'm surprised the WSJ didn't have any depth on what's happened and why.

"Backwardation" is a term that must be used here. That's where the spot price was higher than the future price.

For anyone unfamiliar, pretty much any commodity can trade under a futures contract. That means you as a producer or consumer can lock in a price at a future point. But you must come up with the commodity on that date or come up with the money and take delivery.

So imagine the spot (current) price is $70/oz but the future price is $65/oz. That means nobody is really buying at $70 when a price a month out is $65. So how does this happen/ Because dealers in the market have written futures contracts for silver they don't have and they will have to buy at the spot price to cover it at some point. They either don't want to or can't. Best case scenario, they're going to take a massive loss. Worst case, they are insolvent.

So there was little to no activity at the spot price even though it's at a record high. Refiners weren't buying.

There's a market for borrowing silver from people who have it and that market exploded this year as these dealers sought temporary relief for the futures contracts they had to cover.

All of this signaled that banks and refiners were essentially conspiring to suppress silver prices to remain solvent and that at some point the dam was going to burst.

And it did because China, who refines 60-70% of the world's silver, decided they would cease exports because of local demand for things like solar panels.

So here we are.

No major bank has an unhedged silver position remotely large enough to risk its solvency, the market is just not large enough. When I read this kind of conspiracy post I think you're long and talking your book.

So your position is that I have a long position and I somehow think that I can move the global silver market by commenting on HN? Do I have that right?

This all might be new to you but it's not news and it's not controversial (eg [1]).

[1]: https://www.marketwatch.com/livecoverage/stock-market-today-...

Question is will you join the pump for a third time after the first two dumps? Crystal ball says he gonna

oh no its getting worse...

Turns out it was a speculative pump-and-dump that duped the dumbest of the dumb, not the pumper's fake theory you loyally regurgitated. Shocking.

This absolutely hurts my soul.

Pre-covid, I religiously saved silver (and gold). Just bought some every single paycheck for like 6 years. I had coins, jewelry, bars, silverware, etc.

I wished my parents had left me a treasure, but they didn't, so I thought I'd do that for my kids, maybe even leave them a map... But I don't have kids, so after being locked in my house during covid, I kind of went a bit crazy.

I sold it all and moved states (after travelling quite a bit). My collection was quite massive, and I 100% knew that this day would come, but I didn't care, I just needed a new view. I live near the beach now, but... if I just held, I'd be in a much better place. I hate myself a bit for selling.

At least you didn’t buy bitcoin at $200 and sell at $400 thinking you made out like a bandit, like me. (I basically never think about this though, and it shouldn’t hurt your soul.)

Heh I bought at $20 and sold at $1000. It was only 1 BTC. I bought I think 2 or 3 and mined a bit too but back then exchanges got hacked all the time. Honestly I do not feel bad. Every pizza I bought could have been tens of thousands too if I knew how BTC would turn out (or Nvidia or Netflix or the outcome of any major sporting event, etc.). I made a profit and it helped at the time. I am not sore about it because I also do not know how many dumb investments I passed up that would have just lost money.

You did make out like a bandit. 100% returns is incredible.

Would have been like 43000% returns if he'd held it tho.

Absent the rampant criminal outcomes that many experienced who otherwise had gains.

Hey that sounds familiar. I did buy AMD at $2 and sold it at $4 when first Ryzen came out

You must have a time machine, because when the first ryzen in 2017 came out, AMD price was around 12 - 13 USD.

The last time AMD was at 2-3 USD was in late 2015 :-D

I was working with Bitcoin in my job back in 2013 when it was around 40-50 USD - if I see the charts today, it makes me cry every day - esp. since I was in that role, on the institutional side - and I didnt believe in it.

(though, I have to admit I was a student back then, but just a few weekends less with the colleagues would have made me a wealthy person)

Your upset because you used hard earned money to completely change your life to the point that you now live near the beach? Buddy, that is exactly what money is for and it appears you used it more wisely than 99% of everyone else. Congrats on making the leap to better your situation and have experiences that will never be replaced. Enjoy your life! Looks like you are doing that so continue doing it! This is what it is all for!

If you sold it and bought housing 4+ years ago when interest rates were near zero you've still got the last laugh.

People holding dollars instead of PMs or real estate are the real bag holders. Not only are they actively paying for those fed generated artificial interest rate negative real rate mortgages that property owners got (paid for via inflation on non property owners), they missed out on massive appreciation of property and PMs. They are literally paying the richest people to become even richer, and paying them for the privilege to get further and further away from ever owning their own home.

If you sold in 2023 or 2024 though, you basically got fucked both ways.

PM?

Precious Metals

precious metals?

My version of this took place in 2003 when I bought shares of a new company that rented out DVDs through the mail. I had been a customer for a few years and thought it was a pretty neat concept. Bought at around $20 per share, sold at around $27 a few years later when I was a broke grad student and needed some cash. What’s done is done. At some point, you just need to let it go.

I burned like 10 MTG alpha mint black lotuses at a camp fire.

you're a monster.

I didn't know!

You have to try to not think like that. I know because I’ve been in similar places with investments. Just try to focus on gratitude.

You're right. What's done is done, and there's no going back now.

Silver is limited in supply. The production is actually in deficit for years now, as silver gets used up and there is very little recycling.

Oil on the other hand is infinite.

How is it infinite? Oil forms from ancient organic matter under intense heat and pressure, a process taking millions of years, making it non-renewable on human timescales.

It can be synthesized from air and water with energy and the right catalysts, although the process isn’t cheap. However if solar power keeps getting cheaper it might become feasible to produce it this way instead of drilling.

Silver can be synthesized in particle colliders. Does that make it an infinite resource?

Very interesting, I wasn’t aware of that

Despite spending a mind-numbing amount of time deeply embedded in the automotive world, I had no idea synthetic oil didn’t have oil or petroleum precursors.

This is an incredible, and wildly under discussed win.

As soon as solar energy is being used at scale, this will probably become way more commonly used - big electricity expense is the only main cost.

Carbon capture is the other main input…hmmm.

The problem is that solar only works when the sun is out and startup/shutdown on industrial chemical processes isn’t easy. Once you start involving batteries for around-the-clock operation, it’s more efficient just to use electricity directly. Synthetic hydrocarbons are best used for the cases like aviation where the energy density is the biggest hurdle.

Yes, these are the historical barriers.

They’re melting.

DME is even easier to synthetize from syngas and afterwards methanol than synth oil.

It's simply the reverse of oxidizing it (AKA combusting it).

Biodiesel is a thing.

Anyone with basic physical literacy knows nothing extractive is infinite.

What interest is served by posting this obviously wrong rhetoric?

Sarcasm? 150-200M oz of silver are recycled annually[1]. Oil obviously is mostly burned and won't be recoverable, and clearly finite (even if we managed to squeeze out more with fracking etc.)

1: https://www.physicalgold.com/insights/how-much-silver-is-rec...

You must have had a lot of fun when the "peak oil" crowd was dominating the conversation.

Annually, we consume more oil than we find additional reserves of. The difference is something like 12 times less than annual consumption, and the gap is widening.

If you’ve found a way to escape that arithmetic, I’m all ears.

The math is pretty simple: the world consumes 36 billion barrels of oil a year and there are like 2 trillion barrels of known reserves. We have enough reserves for 55 years of current consumption. There’s 0 incentive to find more.

To follow up on that, I think that 50 year horizon number has even been the case for something well over 50 years now. It seems we are incentivized currently to extract from deposits around that threshold of years? One professor I had even claimed this will always hold true indefinitely, since at some point we’ll switch away from oil, this holding constant there being about 50 years of known reserves left, once it become economically infeasible to extract that oil.

There's a $60+ / barrel incentive to find and extract more.

Ostensibly not all known oil fields are actively being extracted. This fact alone makes it unlikely that discovering a new source would affect the price of oil, unless it can be retrieved using cheaper than the existing methods. It’s also worth pointing out that “oil” as a resource isn’t this homogenous substance. Basically every different source of oil has a different (and expensive) refinement process on the other end. It’s a lot more variables than the Reddit-style armchair oil tycoon would probably expect.

I'm sorry, Reddit-style armchair oil tycoon? I've been using the word "oil" commodity the same way as everyone else has, why did you pick out my comment for that aspersion? Why not upthread when people were discussing 0 incentives? You are applying this aspersion and standard asymmetrically.

Am I? I think I used it in 100% of my comments before this one… it was not meant as an offense, but more as an acknowledgement that almost nobody here (including myself; I’ll happily take the moniker if you won’t) has the appropriate knowledge to argue this topic.

Nobody was talking about changing the price of oil, though.

Just someone getting paid market rate for the additional barrels.

Fair enough, though production does impact price to a degree. For oil this is less important than some other commodities, but it’s still a factor. But this is really a tangent from the central argument that is: oil exploration isn’t so important if we already aren’t producing from many existing known sources, and exploration itself is only sort of loosely tied to selling the end-product in terms of sales.

New exploration is in the $35-40 break even range, not $60. A well with $60 break even is a poor investment right now.

Incentive != break even point.

$35-40 takes into account the risks and time value of the investment, potential price fluctuations, and the preference for (all else equal) lowest cost extraction.

I would not expect someone to dump in a shit ton of money, hope the well works out, and nothing else go wrong right at an expected cost at $60/barrel with amortized investments/operations included.

Interesting graphs of US oil and gas production:

https://www.eia.gov/todayinenergy/detail.php?id=66564

Funny, I like it. I guess gold has been too expensive for a while.

Erm, actually once we have subatomic assemblers then silver will also be infinite.

For every person on this thread, this is the best advice I ever got investing: Any trade that gains money is a good trade. If anyone knew how any companies stock would turn out, Bitcoin, and PM'S would turn out, congratulations you discovered out time travel would break the economy:D

The human verification script used on this site caused my phone's speakers to wig out.

This is the inevitable result of western countries taxing oil.

The higher the taxes the lower the price of crude has to be for people to afford it. This means reduced western demand at high prices.

However this doesn't reduce consumption, it just shifts the consumption to the developing world, where there are minimal if any taxes on consumption.

Not sure which western countries you’re referring to but the US has pretty giant subsidies on oil.[0][1] Of course it’s also taxed but the pro source shows that most of the subsidies are tax reductions.

0: pro fossil fuels: https://energyanalytics.org/u-s-fossil-fuel-subsidies/

1: anti fossil fuels: https://e360.yale.edu/digest/republican-spending-bill-fossil...

> However this doesn't reduce consumption, it just shifts the consumption to the developing world

This is true if production levels aren't responsive to prices, but I see no reason that would be the case. Petroleum production levels are known to be quite responsive to upward price movements.

There have been seconds order effects that have led to lower fuel consumption. Cars typically consume less fuel for the same distance driven compared to two decades ago. Part of that is increased fuel economy, part of it is smaller / more efficient cars growing in popularity.

The producers vary production to drive price movements, not the other way around.

Meanwhile in most states there is no sales tax at all on silver bullion.

I think it start Jan. 1 in Washington.

If only this wasn't wholly predictable...

time to sell the silverware

I know, right? Stainless steel is objectively better. Send the silver on to some valuable use, like making PV cells.

How about Microsoft Silverlight

https://opensilver.net/

Discussion (21 points, 23 hours ago, 23 comments) https://news.ycombinator.com/item?id=46396755

no paywall: https://www.wsj.com/finance/commodities-futures/an-ounce-of-...

Visible without JavaScript etc.: https://archive.ph/qUe7n (it was already there when I checked).

There's an asian AI guy on youtube providing a lot of information about what is going on with the silver right now. Sometimes it seems like he has some insider information, and the whole reasoning seems to come from an expert.

It's strange because it's just not one channel but multiple, and the person behind has kept uploading videos during the entire duration of these holidays. So far, he seems to be quite accurate with his predictions. It's been quite informative.

If someone is curious, one of many: https://youtu.be/vBIUZGlNkks

Can someone explain why this comment feels like guerrilla marketing?

Today's video on the 1934 Silver Purchase Act is fascinating

https://x.com/echodatruth/status/2004802236224766009

What's an Asian AI guy?

...someone with Blockchain & Cloud support?

That video is an interesting switch-up from the past 'JP Morgan the silver suppressor' thing that everyone was going with. Now that silver is going up a new uniting belief is required for the silver stackers. Reminds me of the 'Game Stop stock will literally make everyone with a single share a millionaire' strat that had retail investors clamouring to get as much as much as they could and to hold it to the grave no matter how much it dropped. Just two more weeks bro. I think these sorts of videos prey on people without the sophistication to understand financial markets or assets. Everything the AI guy is saying could be 100% true but how would you know? Everything about Gamestop stock was a lie but it had the same sort of ring to it.

I guess eventually people develop enough discernment to say they don't know whats going on, until then slop like this is taken as Gospel.

> Everything the AI guy is saying could be 100% true but how would you know?

Stop talking, start reading.

Do you not realize this is an AI generated person?

OP did call him AI. If the underlying research is valid rather than AI generated it can still be valuable. Seems like this guy is using an AI persona essentially to communicate his ideas.

To me, AI Asian guy sounds like an AI generated person that is Asian. Asian AI guy sounds like you could be talking about Andrew Ng or some one else that teaches about ML, LLMs, etc.

He realized it. But you did not realize that.

Maybe? He said “Asian AI guy”, which is pretty weird.

Then he went on to claim this bizzaro video has “been quite informative.” When it’s definitely an AI slop pumping mechanism.

TBH his comment is probably part of the campaign.

Oh, I wrote "asian ai guy" because that's the name people are using in these YouTube videos.

Maybe you are right and the video is just ai slop. I just wanted to share it, because I learnt with them how futures, arbitrage and market manipulation works.

Also, I can assure you that I am not part of any campaign, but of course, what else would I say?

What? Did you even read the first sentence he wrote?

Reply on news.ycombinator.com