COMEX is the futures and options exchange where the price of many
commodities is set, including silver. Since peaking at 138.5 million
ounces in August 2008, the COMEX silver inventory dropped sharply for nearly
three straight years and bottomed this past June at 98 million ounces.
This rapid drop led many silver observers to believe we were on the
precipice of a severe supply crunch in silver that would lead to a
skyrocketing silver price
However, beginning in July 2011, the COMEX silver inventory began a
dramatic rise. Since then, the inventory has increased by 45% and now
stands at142.1 million ounces, 4 million ounces higher than it's peak level in August 2008. Despite this significant increase in
inventory, the price of silver has risen 5.6% YTD. Some silver observes
claim this huge run-up in silver inventory is proof that there is chaos
in the silver market. I don't subscribe to that theory; rather, I think
the answer is simple...there's an overabundance of inventory in the
silver market. If supply/demand was tight, you'd see inventory exiting
the COMEX because this is a relatively easy place to get it.
Price of SilverJanuary 1, 2012 => $28.78
May 4, 2012 => $30.40
YTD Return => 5.6%
Disclosure: I own positions in silver bullion
