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Troubling Turnover

The turnover or physical movement of metal brought into or taken out of the COMEX silver warehouses literally exploded over the last three weeks, as nearly 22 million ounces were moved and total inventories fell 4.5 million ounces, to 156.9 million ounces. I can recall only a few weeks over the past five years where more silver was physically moved. Please remember that I am speaking of physical movement and not paper work changes of metal being reclassified between the registered and eligible COMEX categories, on which so much is written. Physical turnover is just that – metal taken from warehouses and put on trucks and metal taken off trucks and put into the COMEX warehouses.

The amounts of physical silver being shuffled into and out from the various COMEX silver warehouses is enormous, equally 50% and more of world total mine production at times. I continue to be flabbergasted that the COMEX silver warehouse movement is completely overlooked in the analytical community despite this movement being so large, persistent and easy to verify.

For five years, I have ranted and raved about the frantic turnover and physical movement of the COMEX silver inventories. Most importantly, this frantic physical inventory movement is unique to silver and no other commodity. Compared to any other commodity, the turnover is unusual because there is so much less silver in the world than there was 20, 30 or 60 years ago. What little silver we have left in the world is spinning in and out of the COMEX warehouses like there is no tomorrow. My conclusion is that it represents extreme tightness in the wholesale physical silver market. Physical tightness and shortage are not different, except in degree.

Of the 40 to 50 billion ounces of silver mined throughout history, the total visible world inventory of 1,000 ounce bars is less than one billion ounces. Further, we know the reason we have such a small amount of silver remaining compared to what was produced throughout history – because the vast bulk was consumed industrially over the past 50 or 100 years. That’s why we have more gold in the world than silver, despite much larger production in silver than in gold

Over the past five years, world visible silver inventories have remained flat to lower, even though the data reflected that true total inventories were no longer being depleted. This fits in nicely with my premise that JPMorgan has been accumulating massive amounts of physical silver and shielding it from view.

Total COMEX silver inventories hit their lowest level in three years, at under 155.4 million ounces recently. That’s down by nearly 30 million ounces from last year and flies in the face of the widespread belief in a silver surplus. Not only are visible silver inventories actually decreasing, the inventories are being frantically turned over. The price of silver remains stuck at some impossible-to-justify depressed level, yet physical demand has caused its turnover to explode. I don’t think there could be more compelling proof of price manipulation and a skyrocketing price to come. The surplus in crude oil is as real as rain and the price is mostly reflective of the physical glut in oil. But the “surplus” in silver is only a surplus of COMEX futures contracts and not of real metal. The evidence in silver points to a growing physical tightness based upon the documented COMEX physical turnover and visible inventories shrinking instead of growing. If that’s not an invitation to buy and hold silver, then I don’t know what is.

January 28, 2016

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