Thursday, November 20, 2008
Since the inventory/price charts for the iShares Silver Trust (AMEX:SLV) haven't been updated in a while, now seemed like a perfectly good time to do so. As shown below, there's been a net inventory decline of about 200 tonnes over the last month.This follows a net addition of more than 1,500 tonnes since March when the silver price peaked at over $20 an ounce.
For the year, about 2,000 tonnes have been added, an increase of about 42 percent, as the price has fallen by almost the same amount.
This is shown clearly below, the expected relationship between price and inventory (i.e., the two generally moving together) ending abruptly after the March high.
Looked at another way as shown in the chart below, the inventory-to-price ratio is down slightly from an all-time high of 770 in late-October, just before the first of the three most recent inventory reductions occurred.
As is the case for "paper" prices versus "physical" prices for silver bullion, a dramatic change occurred in July as indicated in the slope of the green curve above. Forced sales by hedge funds and other sales on futures markets have pushed the price of the metal down but owners of SLV shares have been buyers, not sellers, during this entire period.
Recall that next Friday, November 28th, is first notice day for December deliveries on the Comex, an event that could produce some interesting results.
In years past, the day after Thanksgiving has been a rather exciting one in metals markets due to exceptionally light volume on U.S. exchanges.
This year will likely not be any different.