In Ted Butler's Archive


Oddly enough, there have been withdrawals of silver from the exchange traded fund SLV when there should have been deposits. Metal was not deposited into SLV while it was deposited into GLD under remarkably similar trading circumstances. The most plausible explanation is that gold was available for deposit, while silver was not. Even if the delay in SLV is relatively short it is clear that there was a delay in depositing silver while there was no delay in gold. Even when the price of silver surges and volume explodes deposits of metal are still not forthcoming into the trust. Big silver metal deposits of six million ounces should have been made into the SLV on some trading days. As of now, no deposits have been reported. The word for the inability to deliver a physical commodity in a timely manner is shortage.

On the other hand, almost seven million ounces were removed from the SLV on a single trading day. This continuous withdrawal of metal from SLV may have to do with the conversion of shares into metal to avoid the SEC’s 5% share ownership reporting requirements by a big buyer (likely JPMorgan). That’s bullish, not bearish.

Because there is so much less available silver than gold in the world as a result of a half-century of deficit industrial consumption and because silver is the one true dual use commodity (industrial and investment), any burst of investment demand will trip off a shortage. Well guess what – we just got a burst of investment demand last Friday in SLV and what resulted can reasonably be termed a shortage; maybe not a big and lasting shortage, but certainly within the true meaning of the word. Like most anything else, shortage is a matter of degree and it’s easy for a mild shortage to change into a severe shortage.

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