#SilverSqueeze hits London as SLV warns of Limited Available Silver Supply

Less than a week ago in ‘Houston, we have a Problem”: 85% of Silver in London already held by ETFs’, we explained how with the emergence of the #SilverSqueeze, the silver-backed ETFs which claim to hold their silver in London, now account for 85% of all the silver claimed to be stored in the London LBMA vaults (over 28,000 tonnes of the LBMA total of 33,609 tonnes). This, for anyone who can out 2 and 2 together, does not leave very much available silver in London for silver ETFs or for anyone else, especially the largest silver ETF in the market the giant iShares Silver Trust (SLV), which let’s not forget has the infamous JP Morgan as custodian.  

That SLV has seen massive dollar inflows in late January and early February with corresponding jumps in claimed silver holdings is now widely known, but is worth repeating here, for what’s about to come next.

3,416.11 Tonnes of Silver?

The intense market interest in the iShares Silver Trust (SLV) started on 28January when a huge volume of 152 million shares traded on NYSE Arca. Again on Friday 29January, SLV traded a massive volume of 113 million shares. This led to an increase in SLV ‘Shares Outstanding’ on Friday 29 January of 37 million shares, and a same day claim by JP Morgan, the SLV custodian, that it had increased the silver held in the SLV by 37.67 million ozs (1,171 tonnes), all claimed to be sourced in the LBMA vaults in London.

On Monday 01 February, an even larger 280 million SLV shares traded on NYSE, and by end of day SLV shares outstanding jumped by 20 million. On that day SLV claimed to add another 15.376 million ounces of silver (478.25 tonnes) within the LBMA vaults in London, about three-quarters of the value of the new SLV shares created on that day.

On Tuesday 2 February, with SLV trading still elevated on NYSE, the iShares Silver Trust created a massive 61,350,000 new SLV shares, bringing the SLV shares outstanding to 729.1 million. On the same day, JP Morgan and Blackrock claimed to have added a huge 56.783 million ozs of silver (1,766 tonnes) to the SLV (again all in London), an incredible amount by any measure, but still short of reflecting the total of 118.45 million total of new shares that had been created between Friday and Tuesday (which led them to adjust down shares outstanding by 8.6 million on Wednesday 3 February).

Over this time, you can see a nearly one for one relationship between the change in number of SLV shares outstanding and the amount of silver ounces claimed to be added to SLV.

Between Friday 29 January and Wednesday 3 February inclusive, SLV shares outstanding increased by a net 109.85 million. Over the 3-day period from Friday 29 January to Tuesday 2 February, SLV claimed to have added an incredible 109.83 million ozs of silver (3,416.11 tonnes), with holdings of silver bars rising from 567.52 million ozs of silver to 677.35 million ounces (from 17,651.77 tonnes to 21,067.88 tonnes).

According to the SLV daily bar lists, this extra 3,416.11 tonnes of silver added to SLV between 29 January and 2 February was in the form of 113,501 Good Delivery silver bars (the bars weighing approx. 1000 oz each). Again, according to the SLV bar list, these bars were added in five London vaults which SLV uses, namely Brinks vault in Premier Park London (45.5%), Loomis London vault (27.7%), Brinks Unit 7 vault Radius Park London (15.5%), Malca Amit London vault (6.0%) and JP Morgan’s own London vault (a measly 5.3%).

In fact, according to the bar lists, SLV only started tapping into silver in the Brinks Premier park vault on Monday 1 February, and only started tapping to silver held in the Loomis London vault on Tuesday 2 February. Which to some people may look like a case of desperation or maybe even panic.

Unable to Acquire Sufficient Silver

Adding 3,416.11 tonnes of silver to SLV between 29 January and 2 February is not something that JP Morgan can easily claim to do again.

Which is why it’s particularly interesting that on Wednesday 3 February, right after claiming to add 3416 tonnes of silver to SLV by frantically tapping the LBMA vaults in London, the iShares Silver Trust prospectus was changed, and the following wording added:

The demand for silver may temporarily exceed available supply that is acceptable for delivery to the Trust, which may adversely affect an investment in the Shares.

To the extent that demand for silver exceeds the available supply at that time, Authorized Participants may not be able to readily acquire sufficient amounts of silver necessary for the creation of a Basket.

for the issuance of new Baskets due to a limited then-available supply coupled with a surge in demand for the Shares.

In such circumstances, the Trust may suspend or restrict the issuance of Baskets. Such occurrence may lead to further volatility in Share price and deviations, which may be significant, in the market price of the Shares relative to the NAV.”

That the prospectus change was first drafted on Wednesday 3 February is clear by looking at prospectus pdf filename which is ‘p-ishares-silver-trust-prospectus-3-feb.pdf’ and the pdf title ‘Microsoft Word – slv20210203_s3asr_v1.docx’, which was authored by someone called ‘nick’. While the draft started in Word, the final version was saved as a pdf on 5 February… Via – Zero Hedge

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