The fact that so many people are taking the cash route so early in July leads me to conclude that a hefty premium is being paid to compensate contract holders to give up delivery rights. SLV that stands for Satellite Launch Vehicle, was a project started by the Indian Space Research Organisation (ISRO) and was headed by APJ Abdul Kalam in the early 1970s, to develop the technology needed to launch satellites.
The Comex only has about 29 million ounces available for delivery to serve those 2,397 contracts, representing about 12 million ounces, so there is no doubt that it has every incentive to induce cash settlement. I studied this ETF and was very impressed with Eric Sprott.
I want to begin with a review of what I learned by my study of the Silver Comex. For example: In case of ASLV with vehicle weight of 41 tons, can launch payloads of 150 kgs into space upto an orbit of 400 kms. Only price discovery can alleviate the shortage – that is the free market way of allocating scarce resources. I believe that I missed the bottom at $32.50, but in light of what I see ahead, I don’t think missing the bottom by a few dollars will make a great deal of difference. I recently read a post from someone who talked about the Sprott Physical Silver ETF. People who have read me in the past know that I already own more than my fair share of physical gold and silver. ETF Securities manages the Physical Silver ETF (symbol SIVR), which has seen silver's price fluctuate widely since its start in 2007. Market efficiency depends on correct and timely information. Is there any other possible financial reason that contract holders would take the trouble to deposit funds into their Comex account to fully prepay silver delivery and then just accept a cash settlement? It is real and it is undeniable.
That begs the question: How can I play the Silver ETF trade? The fact that so many people are taking the cash route so early in July leads me to conclude that a hefty premium is being paid to compensate contract holders to give up delivery rights. [Click all to enlarge] A look at these charts will show that during the last move in silver, both ETFs acted in an identical fashion. Alternatively, contango is a market condition where futures prices are higher in the succeeding delivery months and erodes ETF returns from that of physical silver prices. The price of silver going into July has been pretty steady, though volatile. Last weekend I did a lot of study on the Silver Comex, the Silver ETF (NYSEARCA:SLV) and the Sprott Physical Silver ETF (NYSEARCA:PSLV). However, there is no crash-induced incentive to accept cash over physical. Buying and selling physical silver is a very laborious process and I welcomed the ease of trading this asset so easily. The Comex should welcome the recognition of the shortage as it would drive the price up. Going back to May, 2,166 contracts stood for delivery in the silver futures market.
This is the youngest ETF in the physical silver group, opening in 2010. This could delay the redemption process for investors with smaller baskets and thus could expose them to changes in the price of silver. The Sprott Physical Silver Trust (PSLV) is managed by Sprott Asset Management LP.
Investors wanting to redeem less than 10 bars must wait until their redemption orders are combined with others to reach the 10-bar minimum, exposing them to fluctuations in silver prices. I believe this we will soon see the final stages of the silver paper market. SLV that stands for Satellite Launch Vehicle, was a project started by the Indian Space Research Organisation (ISRO) and was headed by APJ Abdul Kalam in the early 1970s, to develop the technology needed to launch satellites. The average daily volume exceeds 1 million shares. It boasts an average daily trading volume of more than 11 million shares and is backed with physical silver held by a third party in New York and London. These ETFs provide direct exposure to silver without the risks of futures or the headaches of physical ownership. In my opinion, there is no debate regarding any physical shortage of silver. While ETFs using silver derivatives can deliver returns similar to physical silver, they also come with unique conditions like backwardation and contango.
Although several ETFs track the price of silver, only three are backed by physical silver. SLV is passively managed, with an annual expense ratio of 0.50 percent of net asset value. Other considerations include ultra shares, with which positions are leveraged to trade three times normal silver prices.
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