Scary Comex Silver Withdrawals: Will They Continue?

It’s bad enough that the silver backing the COMEX futures market is only 1/12^th of the amount of silver that is under contract, but the day before Halloween dropped a new trick on things. Total Silver withdrawn on October 30^th totaled a massive 3,627,012 ounces. More than two thirds of that amount, 2,585,384 ounces came off the Registered Side of the equation. Since the end of July 2009, the Total Registered amount of silver (silver held by depositories to directly offset futures) has fallen by 10 million ounces. The Friday drawdown was one of the largest that I have seen and would indicate that some of the players are in agreement with the thought that if you don’t have silver in hand, you don’t have silver.

Friday’s Registered silver was 52,695,755. Eligible silver totaled 60,985,505, Combined total of 113,681,260, the lowest level of stocks since 2006.

Silver prices meanwhile hovered in the $16-17 dollar range last week, showing surprising strength in the face of heavy commercial short positions. Small investors are seeing a definite upside, adding 2200 contracts to their weekly position while even the Commercials added slightly more than a 1000 contracts to the Long side. Overall silver under contract fell to 664 Moz from 677 Moz the week prior.

Silver continues to follow Gold in terms of price, with Gold taking cues from the recent IMF sale to India as a bullish indicator. If you are not in silver at this point, I would consider adding a small amount at this point, but I still think that at least one more drop is coming below $16 in order to allow the Commercial Shorts to clear their positions.

Disclosures Long SLV, GLD, physical metal, retirement accounts

Comments

[kohalakid:]

Another thoughtful article by Ed Zimmer about the perilous state of the COMEX silver market!!! Oh, joy!!!

Ed, could you please respond to my last comment made in response to your Oct 21st article "Silver Futures Show Markets Are Acting Strangely"???

Nov 04 08:51 AM

[secmaven:]

"The" commercial shorts? Try JPMorgan.

Nov 04 11:38 AM

[frdm45:]

Could someone please enlighten me as to the difference between registered and eligible as it refers to the Comex gold and silver positions, and if one number is more significant than the other? Much appreciated........

Nov 04 11:56 AM

[kohalakid:]

Registered silver has been put on warrant, meaning it has been set aside in 5000 oz +/- lots and given warehouse receipt numbers that can be delivered against COMEX contracts by the holders of the silver. Eligible silver meets all the specifications of good delivery silver, but the owner has not elected to have it put in the form of COMEX warehouse receipts. The process cost a bit and if the holder can use it for another purpose (deliver it against SLV shares or find a industrial user) they can save a cent or two.
But if they get called to deliver against COMEX short positions, then the eligible silver is there ready to be put into contract form.


On Nov 04 11:56 AM frdm45 wrote:

> Could someone please enlighten me as to the difference between registered
> and eligible as it refers to the Comex gold and silver positions,
> and if one number is more significant than the other? Much appreciated........

Nov 04 12:12 PM

[frdm45:]

kohalakid - thank you

Nov 04 12:42 PM

[swsprime:]

Ed,

I'm sure we are about out of world silver stock. As far as I can work it out in 2005 we had 200 million ounces after a virtually straight line decline of 125 million ounces/year since 1989. After the advent of Silver ETF's in 2006 the world stocks have risen to 600 million ounces this year. 3x'd in three years?? That's certainly a fake statistic; there was no massive change in production levels or huge rush to melt Silver Jewelry.

I note that a major Silver Stock is head and shouldering, and you say one more drop is coming below $16 in order to allow the Commercial Shorts to clear their positions. When do you expect the hit date?

Nov 05 06:02 PM