Silver ETF Reaches New Inventory High

If only the futures price would catch on to what has been happening over the last year or so at the world's largest silver ETF, the iShares Silver Trust (NYSEArca:SLV). With a massive addition of 218 tonnes on Friday, inventory reached a new all-time high of 7,063 tonnes.
You wouldn't know how popular the metal has become by looking at recent prices, but the level of inventory tells a different story.

The number of "tonnes in the trust" is now almost 50 percent higher than a year ago with the price of silver still down almost 50 percent from its March highs.

According to data from iShares, Friday's big gain followed a 55 tonne increase on Thursday making this the second largest two-day addition since the fund was launched almost three years ago. The previous record was a single-day 279 tonne purchase in December of 2006.
While there have been many claims of manipulation in the silver futures market and many still question whether the futures price will ever properly reflect the real price of the metal (premiums at coin shops are still quite high when they have something to sell), it is good to see investor demand so strong amid the recent price weakness.

This is remarkably bullish. With any signs of a turnaround in the global economy (yes, this might take a little while), silver will likely take off like a rocket.

Full Disclosure: Long SLV at time of writing.

Comments

[widestrides:]

So how does it work? When investor demand for the silver ETF increases, rather than increase the price to a point where it would be at a premium to the price of silver, they increase the number of shares and therefore the amount of real silver to back those additional shares? So in this case, dilution is good? Can we be sure they have enough actual silver backing it? Is there an independent auditor? Or do they use futures for some of it?

Jan 13 11:39 AM

[Jingle-Jangle:]

I can only invest here if I do not plan to take home anything but dollars.
In that case when SLV goes up, I cash in and take my money profits.

Jan 13 02:10 PM

[secmaven:]

A contrary view is that the SLV inventory represents an enormous supply of readily available silver. Buy 50,000 shares and redeem them for physical metal. How can there ever be a shortage of physical silver when this vast tonnage overhangs the market?

Jan 13 04:18 PM

[auto44:]

Supply seeems to be meeting demand or else the price would go up. Were it not for the demand that the etf puts on newly mined silver one has to wonder what the price of silver would be. As secmaven points out if the etf dam breaks and the owners stampede the results could be disasterous for silver owners. However, if folks continue to trust in metals more than paper eventually rise could be substantial. Things rarely go up like a rocket,but when they do the usually drop like a brick when they run out of fuel

Jan 13 10:26 PM