Ted Butler Comments on COMEX "Deliverable" Silver

With ZeroHedge pointing out further declines in COMEX silver inventories (see this article from today), it might help to hear an expert talk about what all this means. So I've copped Ted Butler's discussion of COMEX silver inventories from Today's "Ed Steer's Gold and Silver Daily" below:

Many have asked me about daily reports which describe in great detail the changes in COMEX silver warehouse stocks, particularly changes between the two categories labeled registered and eligible. Recently, the registered category has slipped to lows not seen in the past decade. Conversely, the eligible category is near high levels of the past ten years. I prefer to look at total COMEX warehouse stocks (registered and eligible combined). Over the past decade, total silver stocks at the COMEX have range from 95 million ounces to 140 million ounces, with the last high water mark seen in mid-2008. It is noticeable that we have declined almost 40 million ounces since then.

Since so many have given up on anything but a pronounced silver shortage breaking the back of the manipulation and freeing the price, more attention than ever is being placed on anything that might offer an advanced clue to the shortage. I think this explains the microscopic attention given lately to daily changes in the COMEX silver stocks. I have been closely studying these changes in COMEX silver inventories on a daily basis for more than 25 years. For much of that time (before the Internet), I got them by calling the COMEX daily and by subscribing to the exchange's printed statistical sheets for a spell. I don't think I ever missed a day's statistics. An honest assessment of what I learned in all that time is not very much. Even though I still closely monitor the daily changes, I have grown skeptical that the daily COMEX silver inventory changes will ever give that special advanced clue that the silver shortage has arrived. Of course, that won't stop me from continuing to look.

I can't even offer you a complete description of the difference between registered and eligible silver, other than registered used to have a paper bearer warrant attached for delivery purposes. But those paper warrants are being phased out as the warehouse process goes electronic. I don't think anyone can know who actually owns the silver, for instance, or that registered is owned by investors and eligible by dealers. And even if you could discover who owned the COMEX silver, you would still be missing what you are really looking for. What we all want to know is how much of the COMEX silver inventory, no matter who owns it, is available for sale at then-current prices.. That, of course, is only known to the owners themselves. I think the intense study of the daily changes in COMEX silver stocks and categories is really an attempt to uncover how available this silver is to the market.

In fact, trying to determine the true availability of the COMEX silver stocks is what I am trying to uncover by focusing on the turnover or the movement in and out of these inventories. I first noticed a big pick up in the turnover about a year or so ago. Before then, the COMEX silver stocks moved in and out very infrequently. Considering that it would be much cheaper and more efficient to deliver silver already in the COMEX warehouses to those who wanted delivery, rather than to bring in new silver to deliver instead, it occurred to me that one would only do so if the silver already in the warehouse wasn't available. I'm still of that opinion. That's why I write of this turnover weekly. My sense is that very little of the 101 million ounces in the COMEX is available for sale at current prices and, if true, this suggests a tightness in supply. At some point, of course, additional clues may be revealed in monitoring the daily changes in great detail. As I indicated, after 25 years, I'm not about to stop looking now.