One of the key data points in silver is the level and change in recorded bullion inventories, primarily in the COMEX warehouses and the silver ETFs. Particularly over the past few years, any number of daily commentaries have sprung up, slicing and dicing the inventory data, with special emphasis on the COMEX warehouse data, as total inventories there have fallen from roughly 400 million oz (the all-time high) at the start of 2021, to 266 million oz today, a decline of a third and supportive of a physical shortage.
I have monitored COMEX silver warehouse data for close to 40 years and starting about 12.5 years ago began reporting on a highly-unusual development that had just begun – a sudden and now persistent frantic turnover or movement of physical metal into and out from the COMEX silver warehouses of massive proportions. Starting around the same time that JPMorgan opened its COMEX metal warehouses, in April 2011, the unprecedented physical turnover has continued, with an average annual turnover of more than 250 million oz, meaning that over the past 12.5 years, more than 3 billion oz have been physically shuffled in and out from the COMEX warehouses – not something coming close to occurring in any other commodity.
For all the close attention placed on the recorded silver inventories in the COMEX warehouses and the silver ETFs, one particular question remains open and unanswered. There appears to be a potential overlap or possible double-counting of a significant chunk of silver (103 million oz) in the two largest stockpiles of recorded silver bullion inventories in the world, the COMEX warehouses and the holdings in SLV, the largest silver ETF. I’ve mentioned this in the past and tried to make some inquiries along the way, but never received a definitive answer. So, this week, I decided to secure a definitive answer.
The issue revolves around the 103 million oz listed as being held for the I-Shares silver trust (SLV) by the trust’s custodian, JPMorgan, in New York and the 134 million oz held in the JPMorgan COMEX warehouse. This creates the unanswered question of whether the 103 million oz held on behalf of SLV is also a big part of the 134 million oz held in the JPM COMEX warehouse or if the 103 million oz is separate and distinct from the 134 million oz in JPM’s COMEX warehouse? This is a rather simple question that could be of significance.
Let me be as clear as I can be - I don’t know which it is, separate stockpiles of silver or a form of double-counting. I do know the question has been created because there are different regulatory regimes overseeing the reporting of the inventories in SLV and of the COMEX warehouse inventories, so I’m not suggesting anything underhanded. Under the firm belief that it is better to light a candle than to curse the darkness, on Monday, I wrote to the two regulatory bodies having jurisdiction over the inventories in SLV and in the COMEX warehouses to get the question answered. Here is that letter –
Dear Chairs Gensler and Behnam,
I respectfully petition you to settle an issue that straddles your jurisdictions. The issue concerns the accurate public reporting of recorded silver bullion inventories held in the world’s largest silver ETF, SLV, of which BlackRock, Inc. is the sponsor and in the COMEX-approved silver warehouse inventories, of which the CME Group, Inc. is responsible.
The issue centers on the holdings in the JPMorgan COMEX silver warehouse, which currently amount to just over 134 million oz (of the 266 million oz total COMEX holdings) and the 103 million oz reported by BlackRock (of the total 441 million oz in the trust) as being held on behalf of SLV in New York by JPMorgan (which happens to be the official custodian of the physical metal held by SLV.).
The issue revolves around whether the 103 million ounces held on behalf of SLV by JPMorgan in New York is part of the 134 million oz reported by the CME Group as being held in the JPM COMEX warehouse or if these are two separate silver holdings. Since the quantities involved are quite large, it makes a difference to silver investors whether these are two distinct holdings or if this is, effectively, a matter of double-counting. I’m sure you would agree that transparency is the best policy and that investors would be better served if the situation was made clear.
It is because this issue involves different jurisdictions, with the S.E.C. responsible for accurate reporting on SLV and the C.F.T.C. responsible for the accurate reporting of CME Group COMEX warehouse data, that I write to you both. In order to streamline what should be a rather simple resolution process, I am copying this message to the CEOs of BlackRock, the CME Group and JPMorgan, all of which I’m certain would be interested in setting the record straight.
On a separate note, I would like to thank Chairman Gensler for any assistance rendered as a result of my petitions last year about the excessive short position in SLV, as recent data indicate the short position fell from 60 million shares back in August 2022 to 16.5 million shares in the most recent short interest report, as of Oct 31, 2023, a reduction of 72%.
I also know that the answer can be uncovered within a few minutes and a few phone calls, so this is not some heavy-duty investigation, involving a drain on S.E.C. or CFTC resources. I’ve also enlisted the aid of my local congressman, so an answer is just about guaranteed. Again, I’m not suggesting any type of deliberate under-handed activity here, just an issue that fell through regulatory jurisdictional cracks that needs to be clarified.
I do feel that the market consensus considers that the 103 million oz in SLV in New York and the 134 million oz held in the JPM COMEX warehouse are two separate stockpiles and in my weekly tally of the combined holdings in SLV and the COMEX warehouses, I certainly have treated them as separate stockpiles. So, if the regulators report that these are two separate stockpiles, that is largely in the current market thinking and should have little price impact.
However, if it comes out that the 103 million oz is part of the 134 million oz held in the JPM COMEX warehouse, I could imagine a bullish reaction to what was inadvertent double-counting. And in the really way-out realm of speculation, based upon the timeline of me sending the message mid-morning on Monday, compared to the liftoff in silver prices Tuesday morning, my darn Spidey senses are all tingling. Of course, when I receive a response to my question, I’ll publish, as always, that response. Lastly, I’m kind of surprised no one else has sought clarity on this issue before now (including myself).
November 16, 2023