For the week ending July 14th there were unexpectedly large metal deposits into the big silver ETF, SLV (the world’s largest visible physical silver holding). More than 9.5 million ounces have been deposited in the trust in the past few weeks. This is strange because, as you know, the price of silver has been notably weak over this time, hitting new lows for the year. Dramatically lower prices go hand in hand with overall net investor selling and liquidation, meaning there “should” have been metal redemptions from SLV, not big deposits.
It could be that metal was deposited into the trust so that the new shares created by the metal deposits were used to close out existing short positions. Why would someone go to the trouble of depositing physical metal in order to get new shares issued in order to then use those shares to close out a short position in SLV? It would be far simpler to just buy back an existing short position on the open market. I think the short-covering purchase of nearly 10 million shares of SLV in a week would have sent the price strongly higher. However, the deposit of metal wouldn’t exert any real upward price pressure, but would have the same practical result as the closing of the short position. Should the short position in SLV be drastically reduced on the next report, then case closed – the big metal deposits of the past week were unquestionably used to cover the short position.
Why am I making a big deal out of this? After all, I need to discover a new super-bullish factor in silver as much as I need a hole in my head. But if someone moved this week to completely eliminate the short position in SLV so suddenly, what other motivation could there be for such an action than the expectation that prices will soon explode?
For subscription info please go to www.butlerresearch.com