Is A Giant Short Squeeze In Silver Brewing?
by Dave Kranzler, Investment Research Dynamics
Steve St. Angelo wrote an interesting article reporting that U.S. silver imports have mysteriously jumped nearly 44% during Q1 2015 vs Q1 2014. As he details, the big increase is not explained by the demand numbers for industrial silver, silver eagles or the Comex warehouse vault silver stocks. (click on graph to enlarge; source: SRS Rocco Report)
I’m wondering if perhaps JP Morgan might be the source of the import demand. JPM is the custodian of the SLV vault. As of the latest data available from the NYSE, the short interest in SLV is 20.6 million shares. This is an 11% jump in short interest over the previous week’s report. The short interest represents 20.6 million ounces of silver that are theoretically/potentially owed to the SLV Trust. If large holders of SLV decide to turn in their shares for redemption of silver bars – and assuming they are not blocked from doing so by the Trustee – which I know is happening with GLD – the SLV Trust would find itself in an awkward position if it can’t honor deliveries.
Furthermore, JPM is also thought to be the largest source of short interest in Comex futures. Many of us have been postulating that, because of the trading behavior in silver over the last 6 months or so, it appears as if there is a physical supply vs. delivery demand problem brewing in silver. This group includes myself, GATA’s Bill Murphy and Sprott Asset’s John Embry. James Turk has pointed out that silver is currently in backwardation in London, which means there is a short term shortage of physical silver available for delivery into LBMA forward contracts.
To put the Comex silver open interest in perspective, as of the latest open interest report, there were 116,606 open contracts for the July delivery month. This translates into 583 million ounces of silver. As of the latest warehouse stock report, there were 60 million ounces of silver available for delivery in the “registered” account. click to enlarge: