EDITOR NOTE: A warning to any investors holding iShares SLV or any other silver-backed ETF. There are currently more silver “paper” assets being traded than actual silver on the market; USDebtClock estimating around 184.82 paper ounces for every 1 ounce of “real” silver. These ETFs are the very ones shorting the futures market for the physical metal they’re holding in their inventory. SLV and other silver-backed ETF issuers are under major pressure, and the volatility of silver futures market is as well, due to March Delivery contracts soon about to expire. Deliveries start Feb, 24th and currently 65,000 contracts worth 5,000 ounces each could stand for delivery, that’s 325,000,000 ounces, enough to freeze the whole system if people finally have had enough and demand physical metal. The most recent amendment to the Vanguard prospectus below anticipates such an outcome. If you hold silver via ETF, be warned that the value of your holdings may be subject to extreme price fluctuations that neither reflect nor originate from the actual supply and demand of real physical silver. This is the disadvantage of the paper versus the real silver market. Now is the time to buy non-CUSIP silver and gold before the discrepancy between the paper and physical markets results in a major price de-correlation, with paper values tumbling as its physical counterpart continues to rise.
The demand for silver may temporarily exceed available supply that is acceptable for delivery to the Trust, which may adversely affect an investment in the Shares.
To the extent that demand for silver exceeds the available supply at that time, Authorized Participants may not be able to readily acquire sufficient amounts of silver necessary for the creation of a Basket. Baskets may be created only by Authorized Participants, and are only issued in exchange for an amount of silver determined by the Trustee that meets the specifications described below under “Description of the Shares and the Trust Agreement— Deposit of Silver; Issuance of Baskets” on each day that NYSE Arca is open for regular trading. Market speculation in silver could result in increased requests for the issuance of Baskets. It is possible that Authorized Participants may be unable to acquire sufficient silver that is acceptable for delivery to the Trust for the issuance of new Baskets due to a limited then-available supply coupled with a surge in demand for the Shares. In such circumstances, the Trust may suspend or restrict the issuance of Baskets. Such occurrence may lead to further volatility in Share price and deviations, which may be significant, in the market price of the Shares relative to the NAV.
Risks Related to the Shares
A sudden increase in demand for Shares that temporarily exceeds supply may result in price volatility of the Shares.
A significant change in the sentiment of investors towards silver may occur. Investors may purchase Shares to speculate on the price of silver or to hedge existing silver exposure. Speculation on the price of silver may involve long and short exposures. To the extent that the aggregate short exposure exceeds the number of Shares available for purchase, investors with short exposure may have to pay a premium to repurchase Shares for delivery to Share lenders. In turn, those repurchases may dramatically increase the price of the Shares until additional Shares are issued through the creation process. This could lead to volatile price movements in Shares that are not directly correlated to the price of silver.
The trading price of the Shares has recently been, and could potentially continue to be, volatile.
The trading price of the Shares has been highly volatile and could continue to be subject to wide fluctuations in response to various factors. The silver market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to factors such as silver's uses in jewelry, technology, and industrial applications, or cost and production levels in major silver-producing countries such as China, Mexico, and Peru. In particular, supply chain disruptions resulting from the COVID-19 outbreak and investor speculation have significantly contributed to recent price and volume fluctuations.
Originally posted on Vanguard