Another physical silver related issue that remains overlooked is the deposit/withdrawal pattern of metal in the big silver ETF, SLV, the world’s single largest holding of metal. Despite the two best price weeks recently and on higher than normal volume, over that same time a significant amount of silver has been redeemed from the trust; more than 9 million oz. There’s no way of me knowing if the metal was physically shipped out of the London warehouses, or stayed in place as a result of a conversion of shares to physical metal ownership, a simple process for those who may be involved. In either event, the reduction in reported metal holdings in SLV is serious food for thought.
For one thing, the redemptions in SLV are completely counterintuitive to what normally occurs when prices rise and trading is heavy. Usually, net investment demand increases on strong buying and higher prices, necessitating the deposit of metal to correspond with the increase in new shares created by the investment demand. The best current example is in GLD, the big gold ETF.
While the redemption pattern in GLD has been pronounced over the past two years as investors sold on declining gold prices, there have been three straight days of metal deposits into GLD on the recent price strength and higher trading volume. In other words, the deposit pattern in GLD this week was completely normal; whereas the redemptions in SLV on the same or greater price strength and trading volume was as cockeyed as it gets.
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