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1/10 This following video is not entirely correct.
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2/10 The ETFs can not directly buy/sell futures. Unless they are registered as a commodity trading pool, either with an exempt or non-exempt status. In SLV’s case they do not allow futures transactions directly in the fund.
3/10 Jeff Currie may have meant that the Approved Participants (APs) (who provide liquidity and metal to the ETF) may use futures to hedge metal prices before they deliver metal to the ETF. This is a common practice, since APs usually hedge against price risk.
4/10 However, the metal in the ETFs should not be actively managed due to their prospectus. Secondly, the position limit for delivery is currently 1500 contracts. Each contract is 5,000 ounces (5 -1000 oz bars).
5/10 Basically, this amounts to a limit of 7.5 million ounces per delivery month per account. Currently there is roughly 150 million ounces in the registered category. If one individual wanted to start pulling metal off the exchange it would take 20 delivery months to complete
6/10 the entire delivery process, barring no new metal coming onto the exchange. In addition, any major withdrawal would be noticed by the market and most likely cause others to start the delivery process. Therefore, if 20 individuals all wanted the 7.5 million ounces each
7/10 in theory it would take one month to drain the inventory in the registered category. The 53 times number mentioned in the video is in regard to the silver held in both the registered and eligible categories (395 million ounces).
8/10 The silver in the eligible category does not have warrants attached to them and would not be directly impacted unless the owner of that silver wanted place the bars on receipt and sell a futures contract against them. Therefore, the delivery position limits would not take
9/10 53 times but only 20 times the limit based on current numbers. *Very important* the CME just announced they are increasing the position limit for delivery starting with the April contract from 1500 contracts to 3000 contracts.
10/10 So in reality you can effectively double the amount of ounces available for delivery which reduces the number of deliveries by half. Past performance is not a guarantee of future available physical silver ....
