In Ted Butler's Archive


There are six COMEX-approved silver warehouses, four in the vicinity of New York City and two not that far away, in Delaware and Massachusetts. There is not a lot of silver mining or smelting occurring in this narrow area of the Northeastern U.S., although this is a hub for distribution and transportation. This year, some 900,000 ounces of silver on average have moved into or out from these six warehouses on a daily basis.

Converting world annual silver mine production to the same five day work week as COMEX inventories are reported (800 million ounces divided by 250 days), the daily world mine production of silver comes to 3.2 million ounces each business day. The daily average movement of silver into and out from the COMEX silver warehouses at 900,000 ounces is equal to 28% of total world daily mine production, even though the world mines and refines silver in areas far from the narrow area where the COMEX silver warehouses are located. Annualized, this turnover is eight times more silver than is mined in the U.S. and more than it uses in a year.

This unusual warehouse turnover doesn’t exist in any other commodity and didn’t exist in the COMEX silver warehouses until April 2011 and hasn’t stopped since then. You have to scratch your head. I wonder why this unusual turnover in the COMEX silver warehouses started and why it has continued. The most reasonable explanation is a tight physical market in silver, which just happens to coincide with my long term conviction that silver will develop into a physical shortage.

I am virtually alone in writing about the COMEX silver warehouse turnover, but that is not unusual. After all, I began complaining to the regulators about a COMEX silver manipulation in the mid-1980’s and it would be nearly 15 years before others started to see it. I’m sure the turnover is due to physical tightness and a shortage is inevitable.

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