Commodity Trade Mantra

Record Low Silver Inventories may Spark Serious Fireworks in Silver Market

Record Low Silver Inventories may Spark Serious Fireworks in Silver Market

Record Low Silver Inventories may Spark Serious Fireworks in Silver Market

While the world awaits the BREXIT vote, the COMEX Registered Silver Inventories reached a new record as it pertains to leverage.

COMEX Registered Silver Now More Leveraged Than Gold

Matter-a-fact, the number of owners per ounce of Registered Silver is higher than gold.  In the beginning of the year, COMEX Gold Registered inventory owners per ounce spiked to over 500 to 1.

However, the situation for COMEX Registered Gold has calmed down quite a bit as its inventories have risen to 1.7 million oz (Moz) from the low of a 89,000 oz in a little more than six months:

COMEX-Registered-Gold-Owners-Per-Oz

Registered Gold owners per ounce have fallen from over 500/1, to 33/1 currently.  On the other hand, the situation in COMEX Registered Silver shows a much different picture:

COMEX-Registered-Open-Interest-&-Stocks-062216

As owners per oz of Registered Gold have dropped dramatically, and so has the leverage, Registered Silver Inventories have hit a new record of 44 owners per ounce.  This is nearly three times the rise since the latter part of 2015.

So, why have Registered Silver Inventories continued to decline, while Registered Gold Inventories jump higher??  What is even more interesting is that when the price of silver increased from its lows in 2009 to a high of $49 in 2011, the Registered Silver Inventories fell to a low of 26.4 Moz.

Speculation was at the time that industry and investors were acquiring at lot of silver, thus depleting the Registered Silver stocks.  However, something is totally different this time around.  As we can see in the chart above, the Registered Silver Inventories are at the lowest level in more than a decade at 23.3 Moz.

This next chart compares the Registered Silver Inventories during the peak price in 2011 and today:

Leverage-Of-COMEX-Registered-Silver-Contracts

In April 2011, total Registered Silver Inventories fell to a low of 26.4 Moz as total open interest was approximately 750 Moz.  To get the total open interest in ounces, we multiply the open interest by 5,000 oz (a single contract equals 5,000 oz).  Now, if we look at what is taking place today, the leverage is even higher.

With the Registered Silver Inventories at 23.3 Moz, the total open interest is a staggering 1,028 Moz.  This is why the Owners Per Oz is now at 44/1…. another new record.

So, why would Registered Silver Inventories continue to decline since the beginning of the year while Registered Gold Inventories move up much higher?  Well, part of the reason may be due to the Chinese who are now stockpiling silver.  As I stated in previous articles, silver inventories at the Shanghai Futures Exchange increased from a low of 7.5 Moz in August 2015 to over 60 Moz currently.

Furthermore, if industrial silver demand is weaker, why hasn’t the COMEX Registered Silver Inventories increased?  This was the case after the price of silver peaked and fell to $14 at the end of 2015.  Thus, as the price of silver fell from $49 in April 2011, to a low of $14 in 2015, Registered Silver Inventories grew from 26.4 Moz to over 70 Moz last year.

But, something changed in 2015.  Even though the price of silver did not rise all that much, we had the huge spike in Retail Silver Investment starting in June.  This caused Registered Silver Inventories to fall as Indians and North Americans were buying record silver bullion.

Lastly, I am hearing through several sources that Chinese are not only acquiring a lot of silver for industry, they are now buying silver for investment.  It will be interesting to see how things unfold this year, but if the Chinese start really buying and trading silver… we could see serious fireworks in the silver market.

 

 

 

Courtesy: SRSroccoreport

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