warehouse

SHFE Shanghai Futures Exchange Silver Vs. Silver Price

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The Shanghai Futures Exchange Silver contracts started in May 2012 and provide a very important indicator for the silver price.

In fact I even believe that silver inventory at the SHFE warehouses is a leading indicator for the silver price.

You can find the data here: http://www.shfe.com.cn/en/MarketData/dataview.html?paramid=week
 

I have plotted the silver price in U.S. dollars (orange) Vs. silver stocks at the SHFE warehouses (blue). As you can see the SHFE silver stock bottomed in 2014 and started to rise to a high in 2016. Silver prices followed this move upwards with a delay of a year.

Then, silver stocks at the SHFE dropped in July 2017 and silver prices dropped with a delay in July 2018.

It will be interesting to watch how the SHFE silver warehouse stocks are evolving now as there is talk about a whale buying up silver. This whale is thought to be China so we should see this happening in the SHFE silver warehouses soon.

Silver Warehouse Stock CME At 10 year high, or is it?

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According to the CME, silver stocks at warehouses hit a 10 year high this week. This seems to be bad news for silver investors, but I will present a different picture on this. Brother John pointed out already that stockpiles are at record lows in one of his silver updates and I’ll present a more detailed analysis about this in the following article: CME Silver Stocks at an all time high, or are they?.

From Zerohedge:

For those who aren’t familiar with the terminology, the registered category of COMEX warehouse bullion stocks generally refers to gold and silver bars against which COMEX warehouse receipts are outstanding. The COMEX publishes these stocks on a daily basis and they can be found here: Silver | Gold. The registered category is the total pool of gold and silver available at any time to meet delivery requirements under expiring futures contracts or to establish initial futures contract positions through a transaction called exchange-for-physicals (I’ll explain this another time). It is important to realize, however, that many parties holding COMEX gold and silver in registered form have no intention of making their holdings available for delivery. By this I mean that such parties are neither (1) holding a short futures position against the warehouse receipt nor (2) willing to sell their registered metal (warehouse receipts) to a party with a short futures position. Indeed, a substantial portion of those holding registered metal would have acquired the COMEX warehouse receipts by holding long futures positions for delivery. In other words, these registered stocks are held for investment and not for commercial purposes.

In comparison, the eligible category of COMEX warehouse bullion stocks generally refers to bullion held in the warehouses that meets the specifications of an acceptable COMEX bar (proper weight, size, purity and refiner) but does not have a COMEX warehouse receipt issued against it. For example, an investor might purchase several 1,000 oz. bars of silver from a dealer and then deliver the bars for allocated storage at a COMEX warehouse. This is a private arrangement and has nothing to do with the COMEX. Unless these bars are officially registered (the easiest way to do this is through the aforementioned exchange-for-physicals), they will remain in the eligible category until withdrawn from the warehouse by the investor. Thus, the appropriate way to treat eligible COMEX warehouse bullion stocks is that they represent metal that could potentially be registered at some point in the future but cannot presently be used to make delivery under a short futures contract.

Note that Zerohedge says: Eligible silver has NOTHING to do with COMEX!

Chinese buying copper

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At the London Metal Exchange (LME) the copper stock levels keep declining as can be seen on following graph:

LME copper warehouse
LME Copper warehouse level

The Chinese were importing copper at record levels during December 2011 to restock their inventory. There has been a concern that in 2012, there will be a copper deficit, which resulted into this buying frenzy.

As a result we can see that since September 2011 the copper price was going up, just at the same time that LME stock levels were going down.

copper price
Copper price

I can’t blame the Chinese to buy copper, they want real assets and not some US government paper, which they are dumping by the way as can be seen on following graph:

China US treasury
China US treasury holdings

I think the buying frenzy is not over yet, as China is positioning itself to create competition against the London Metals Exchange in June 2012. On that date China will open the Pan Asia Gold Exchange, also known as PAGE, challenging the LME and COMEX.

I predict that gold and silver will explode on that event. Interesting times will emerge later in 2012, so prepare accordingly by buying precious metals!