There seems to be an interesting trend taking place in the silver warehouse stocks at the Shanghai Futures Exchange over the past two months. From May of 2012, when the Exchange started trading silver futures, until the beginning of 2013, silver warehouse stocks grew from virtually nothing to nearly 1,000 metric tonnes.
This can be seen in the table below:
On January 4, 2013, the Shanghai Futures Exchange had a total of 972 metric tonnes in their warehouses. Even though the warehouse stocks fluctuated during the first four months of 2013, the Exchange reached a total of 1,121 metric tonnes of silver on April 12:
However, something changed after April 12th, when the price of silver was taken down more than $5 in two days trading. Instead of the Exchange taking advantage of the lower silver price by adding metal to their inventory… quite the opposite took place.
In less than 2 months, the silver warehouse stocks at the Shanghai Futures Exchange fell from 1,122 (mt) metric tonnes down to 765 mt on May 31:
In just seven weeks, 357 metric tonnes of silver have been removed from the exchange resulting in a 32% decline of warehouse stocks. Now either industrial demand has picked up recently, or investors in China are taking advantage of the lower price of silver.
It does seem quite interesting that silver inventories are declining on the Shanghai Futures Exchange while COMEX levels have remained about the same (165 million oz) since the silver price take-down.
Lastly, according to a recent market survey, 60% of futures experts surveyed by China Finance Corporation were bearish about silver futures traded on the Shanghai Futures Exchange and only 40% were bullish.
If we consider that a higher bearish sentiment normally signals a bottom rather than top, it looks as if the price of silver will be heading higher shortly.
(thanks to judejin for bringing this to my attention)