Most notably, there is continued physical turnover (and now reductions) in the COMEX silver warehouses. I know I beat this to death, but it is so unusual and has persisted for so long (that same 4.5 years), that it deserves to be beaten to death. What puzzles me most is that almost no one else raises the issue, even though it is unique to COMEX silver. At a bare bones minimum, some explanation is in order for a phenomenon that is unprecedented, easily documentable—and is occurring in the second largest public stockpile of silver in the world. My bottom line conclusion is that this frantic inventory turnover is indicative of such strong physical demand that it can morph into an outright wholesale silver shortage at any moment. Once again, a genuine wholesale physical silver shortage will trump any and all paper maneuvering on the COMEX.
After three days of the heaviest trading volume and price appreciation seen in months in the big silver ETF, SLV, it was reported
that silver holdings fell by 1.5 million oz.
This continues a recent (also near 4.5 years old) counterintuitive pattern unique to SLV. Normally, price appreciation and heavy trading volume in SLV would be thought to result in metal deposits, not withdrawals, because that’s when net new buying is most likely to occur. In fact, based upon the trading volume in SLV from Friday through Tuesday, my back-of-the-envelope calculation was that the trust was ‘owed’ as much as five million oz, with no withdrawals expected.
The most plausible explanation for
is that a large player (JPM) was a purchaser of shares in SLV and quickly converted the shares into metal to hide ownership. If there are no deposits over the next few days (if prices hold up), it will also be likely that there was an increase in shares of SLV shorted, although that data won’t be included in the new short report due this week. The actual withdrawal of metal from SLV and lack of deposits suggest tightness in the physical wholesale market, as does the COMEX silver warehouse turnover.
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