Earlier this week, BlackRock reported that they added 571.63 tonnes (183,378,092 ounces) of new physical silver backing to their popular silver ETF iShares Silver Trust (SLV). That is the largest one day addition since December 31, 2007. The bullion is held by the trust’s custodian in London.
The next chart shows that the amount is exceptionnally high (chart courtesy Zerohedge).
The key question is why the ETF is adding such a large amount of physical silver. The truth is that we do not know exactly, so we went out for some opinions.
GotGoldReport published: The silver ETF adds metal to its holdings in response to an imbalance of buying pressure over selling pressure and vice versa. If there is more buying pressure than selling pressure authorized market participants sell new shares of SLV into the market in return for a prescribed amount of silver metal in units called “baskets.” The reverse is also true.
Zerohedge reported: Whether this was due to arbitrage, or simply the need to create inventory we don’t know: we are confident however, that SLV custodian, money laundering expert extraordinaire HSBC, will have no comment. Just as there is no comment why in the days following the epic May 1, 2011 take down of silver, a nearly just as large 522 tons of silver poured out the ETF on May 4, 2011. What is certain is that a move of this size is certainly notable.
GATA wrote the following: What does it mean? Is this real metal or just another paper entry? Maybe it means only what all this stuff means: If you don’t own your metal outside the banking system, you don’t own it at all.
Respected silver market expert Ted Butler wrote to his paid subscribers his take on things. He says that “the deposit can be considered strange and out of place” and he argues why he thinks so. He adds to it that it will probably become clear over time and that he will keep his subscribers updated. We strongly recommend subscribing to Ted Butler’s newsletter for in-depth insights in the silver market.
Gold Silver Worlds | January 20, 2013