Comex Registered Silver Inventories Plunge Nearly 10% In One Day

In a stunning development, the Comex Registered Silver inventories experienced a large one day decline yesterday.  Nearly 10% of total Comex Registered Silver inventories were removed from the exchange on the last day of the year and reported on Jan 4th.

According to the CME Group’s Metal Depository Statistics, 3.5 million ounces (Moz) of Registered Silver Inventories were withdrawn and transferred to the Eligible category:

Comex-Silver-Inventories-010416

As we can see, there was 1.5 Moz transferred out of Brinks, 1.6 Moz from the CNT Depository and nearly 300,000 oz removed from JP Morgan for a total of 3,517,348 oz.  At the end of 2015 (Dec 31st), there were 40.3 Moz held in Registered Silver inventories at the Comex.  After this large one day transfer, only 36.7 Moz remains.

This is an interesting development for two reasons:

  1. This is the lowest level the Comex Registered Silver inventories have been for the past three years and,
  2. The motivation for depositories to transfer that much silver out of its deliverable category.

First, the last time the Comex Registered Silver inventories were this low was in Feb 8th, 2013 at 36.2 Moz.  The lowest the Registered Silver inventories fell to was 26.6 Moz in July 2011.  However, the overall trend of the Registered Silver inventories was up until April, 2015… where they peaked at 70.5 Moz.

In just the past eight months, Registered Silver inventories at the Comex have fallen be nearly 50%.  Again, Registered Silver inventories are those that are ready to be delivered into the market.

Second, something has motivated the holders of this silver to remove it so it is no longer able to be delivered into the market.  If we assume that industrial silver demand has fallen due to a weaker U.S. and global economic activity and there is no longer a retail shortage of silver (as there was from June-Sept 2015), why are we continuing to see silver removed from the Registered Category?

You would think we would be seeing the opposite as the Registered Silver inventories started to build in August, 2011… after the peak and decline of the silver price and investment demand.  And interestingly, the opposite is taking place at the Shanghai Future Exchange.

Shanghai Future Exchange Silver Inventories Surge End Of Year

Silver inventories at the Shanghai Futures Exchange (SHFE) grew from a low of 176 metric tons (mt) in January 2015 to 394 mt in June.  They bottomed in August at 233 mt and then continued to build steadily until spiking at the end of the year:

Shanghai-Exchange-Silver-Stocks-2015-2016

What is really interesting about the build of SHFE silver inventories is the rapid increase since Dec 28th.  On Dec 28th, there were 535 mt of silver at the SHFE, only 23 mt higher than the beginning of the month.  Then over the next week and including the first few days in 2016, total inventories at the Shanghai Futures Exchange jumped 80 mt to 615.

Precious metal investors need to realize the Chinese view gold more as an investment than silver.  Furthermore, the Chinese also have to pay a 17% vat tax on silver investment.  According to the 2015 World Silver Survey, Chinese silver bar investment demand was only 6.2 Moz in 2014 while Official Coins sales were 5.9 Moz.  The notion that the Chinese are buying a lot of physical silver investment is not true… however, they are buying one hell of a lot of gold.

So, this spike of SHFE silver inventories must be motivated more by the decline of industrial silver demand in China than investment demand.  China is the largest silver fabricator in the world as they consumed 5,788 mt (186 million oz) of silver in 2014 via industrial applications (2015 World Silver Survey).

Again, something very strange is happening here.  The Comex continues to see a drain of its Registered Silver inventories (for delivery), while the SHFE inventories are showing a rapid increase.

It will be interesting to see what happens to the silver inventories at these two exchanges over the next 6 months.  If Comex Registered Silver inventories continue to fall (just like the Gold Registered inventories), this could spell more trouble for the highly leveraged paper based precious metal markets going forward.

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35 Comments on "Comex Registered Silver Inventories Plunge Nearly 10% In One Day"

  1. Well Steve…perhaps it’s for ASE & the U S Mint wont need to go on allocation until March now??

    • 4 oz why would it be the US Mint since it happened on the last day of the year. I doubt they would take physical silver on a day leading to a three day holiday. I just cannot not image that. If it was then you would see this happen at the end of most years.

      • Tom, please forgive; Was just thinking out loud…and was meaning to question the Mints ability to produce ASE here in 2016…

  2. Interesting to note which countries add on taxes of around 20% on silver, which in turn discourages investment purchases for the common people.

    • Counterfiat,

      Yes, this is true. Germany was a recently included in adding 17% vat tax to silver investment in 2014. This had a profound impact on Philharmonic sales that year which plummeted. When you consider that many countries in Europe and China have 17% vat taxes on silver investment, I would imagine global silver investment demand might be 50%+ or more without it.

      steve

      • 21% in Spain

        • Netherlands 21% on bars, no taxes on coins. Coins are being seen as investment, bars for industrial use.

          • In the UK VAT is 20% on silver and nil on gold, both for coins/bars. In addition, there is potentially a 28% capital gains tax at time of sale on both except for coins that are UK legal tender (gold Sovereigns and gold/silver Britannias). The taxman here certainly gets his cut!

      • Juergen Heil | January 6, 2016 at 12:57 am |

        Effektiv we are paying 7% import tax (Einfuhrumsatzsteuer).On official coins outside of the European Union. For that reason Philharmonics are exportet and reimported again to avoid taxation of 19 % (not 17 as you mentioned Steve). The sales of bars and rounds is down significantly because of the 19 % VAT.

        • Juergen,

          Thanks for the clarification. I don’t know all the specifics or details in various countries, I was going by a press release about the huge drop in Philharmonic sales in 2014.

          That being said, I do believe if there were NO VAT TAXES on silver in any country, overall physical silver demand would likely be at least 50% higher. This could not stand, which is why I assume the Silver Association Lobby with various countries helped to install this vat tax on silver to protect its larger industrial global silver users. Again, that is a speculation on my part.

          steve

      • staggering 22% VAT on all silver in Slovenia…

        • Rade,

          Thanks for the vat tax info from Slovenia. Wow… 22%. That would defiantly keep a lot of people from buying.

          steve

  3. Steve,

    Major Kudos for this heads up.

    Ladies & Gentlemen,

    This feels to me like the tremors before the quake. We are not the only ones talking about what is going in in the silver market. Looks like a major player maybe making a move, hoping it goes unnoticed or at least with a minimum of attention.

    Maybe time is shorter than we thought.

    SteveW

  4. what im interested in is why none in the oligarchy cobbled together the mere $130 million needed to scoop the last of the gold out of the comex in dec. Theyve restocked now from less than 4 tonnes back to 10 or so, it seems the coffin was open, we had the wooden stake in our hand, we lost out nerve to plunge it in

    • “what im interested in is why none in the oligarchy cobbled together the mere $130 million needed to scoop the last of the gold out of the comex in dec ”

      Becasue they don’t want to crash the system would be my guess.

      • lastmanstanding | January 6, 2016 at 8:27 am |

        I agree. Need to keep some product in the coffers to keep the “paper shuffle” going.

        As the days go on, they need to figure out the perfect way to blow it up, not get blamed, then ride in to save the day…once again.

        In the back of their minds, I believe that even they are beginning to question whether they can pull the plug and regain control.

        I don’t think they can or will…so what control they exert currently will have to do.

        • i appreciate that, but you have to figure – there being no honour amongst theives – that some in the oligarchy will ‘defect’ and sit on a chair – they know the music is stopping anyway. The ‘conspiracy’ is real but its not populated by a single minded entity. Look at the 2008 crisis – 5 merchant banks whittled down to 3. There can be only one, highlander!

  5. A few big investors are hauling their silver over to a safer place; from Comex to SGE? Maybe some hedge funds, imho. When the Comex blows up ther will be cash settlement and the price of physical silver spikes.

    • “When the Comex blows up ther will be cash settlement and the price of physical silver spikes.”

      That’s what the COMEX is already…fiat digits settlement over physical delivery in more than 90% of transactions. And I’m sure they can convince a business entity NOT to stand for physical delivery if they can’t honor it. No news or headlines. The possibility exists they could play their shell game for a long time. Physical could be selling for much higher than spot price and the COMEX game goes on. Look mainstream media just regurgitates the nonsense government puts out on unemployment statistics with 94 million working age Americans not in the work force and not counted as unemployed becasue that doesn’t support the mainstream narrative the Fed and government wants.

      • Yes David, until now it’s working. But what’s a Comex contract worth if there’s only 10 ounces left? Measured against a SGE contract? Especially when SGE silver is priced (much) higher than Comex silver?
        Bad money drives out good money, until it doesn’t. They will dump the dirtiest shirt.

      • but the point is this: settlement in cash is fine, but it will wake the investment community up the the vast disconnect between price and demand, between paper and physical – and then you will have a momentum play that bids up the price in vacuum pocket leaps and bounds

        • … and if comex is having to cash settle 1000s of contracts it sold for $1070 and the price is now $1600 instead of handing over bars of gold ….. hows the solvency of Comex looking? They can print contracts at whim, but they can’t print the cash or the gold

          • “They can print contracts at whim, but they can’t print the cash or the gold”

            They have friends at the Fed Reserve that can print the cash or create the digits out of thin air.

  6. Mathias Graessli | January 6, 2016 at 8:18 am |

    In Switzerland on Bars and Coins 8% VAT

  7. OutLookingIn | January 6, 2016 at 11:32 am |

    Also interesting to note, is the countries affixing a tax to the purchase of physical silver. This smacks of a move to protect the global banking system from loss of confidence and being undermined, by a large move of capital into physical silver, seeking safety.

    The majority of all gold mined throughout history is still with us. Not so with silver. Above ground stocks of silver is finite and a general run on physical silver, would signal a banking system on the verge of collapse. So TPTB will do anything to prevent this from occurring.

    This (IMHO) is nothing more than the central banking cabal, acting in concert to “road block” any massive move into the purchase of physical silver by their citizenry. By erecting financially punitive tax laws against such an action.

  8. Not directly related to this post, but on the theme of “its a new year what will be coming?”, I recommend this read:
    http://investmentresearchdynamics.com/the-federal-reserves-salvation-army-school-of-economics-2/

  9. Could you imagine the stampede to purchase pm s if the usa government imposed a bullion tax by midnight

  10. Silver is dead assset because 17% VAT on silver in China. Period.

    • I wonder in countries that have VAT on silver if that applies to all…not just individual buyers. For emample are corporations with “legitimate” need exempt? And in China the ruling elite and their favored people, businesses, and corporations…they live under different rules and standards than the masses

      • High net worth individuals could maybe use some free trade zone like luxembourg, around zurich airport (in this latter case I think it could work), or maybe the new free trade zone in shanghai (do not know).
        It could also be possible to create your own ETF but I do not think one billionaire on earth would do that, they would just buy gold instead.

    • RD,

      LOL… thanks for the laugh. Chinese have never been large investors of silver. Don’t need the Chinese to totally disrupt the silver market… just 1-2% buying by large institutions. That time is coming.

      steve

  11. Let’s see if I got this right! A collapsing FIAT currency will drive up the silver price. China’s currency
    is collapsing and not one person from China’s 1.5 billion people is buying silver. They kept their Yuan? Wars and rumors of wars is when silver and gold become safe havens. We have an Afghan war, a Syrian war and North Korea now has the largest Army plus Saudi Arabia is squabbling with Iran. Result: Silver drops a few cents per ounce. Then we have miners who are busting their butts to increase production when costs of production exceed costs of sales? They are the only business I know who can consistently do that. Then we have a historic silver to gold ration near 60 but today near 75. Why is wrong here? Doesn’t anyone except us “stackers” buy silver? I bought silver as a hedge. Boy was I gullible. I can only hope my grand children will accept their inheritance? It may be too much of a waste of time. Should I convert it to that lousy old US currency so they can invest it wiser than I did? The US buck is stronger than ever.

  12. Silvrwillwin | January 7, 2016 at 7:04 am |

    There is no doubt that the U.S. dollar / world currency / petro dollar is grinding along . Quite frankly it’s amazing that it’s hung in there for as long as it has based on it’s design to be a debt instrument !
    This is largely due to the expansion of it’s worldly presence.
    The 600 pound gorilla sitting in the room , however is – when will the physical silver market have the balls to secede from the paper silver market ???? The irony is that the physical silver market is positioned to be able to do that today !! There is no doubt that it wouldn’t take much to accomplish a break away very quickly !
    Due to phys. slvr’s size individual holders/owners alone in numbers could jolt this market up in actual $$$$’s if they in unison demanded a hundred dollars an ounce for their pm.,as an example. All they would have to do is run it through a classified ad. If enough of the big pm gurus latched onto this idea and announced it to the world , it would be an easy maneuver. And the irony is that the physical silver owners would be doing NOTHING wrong and everything right !

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