December 2, 2022

Silver And Gold ETFs Stable – Bank Savings vs. Precious Metals and How Much Is a Trillion?

As the silver market stabilized after last week’s sell off, holdings of the iShares Silver Trust (SLV) increased by 153.22 tonnes over the past week.

Since the beginning of the year, the SLV holdings have declined by 381.09 tonnes, but the largest decrease in holdings tracks the silver sell off that began in late April.  From a record high holding of 11,390.06 tonnes of silver on April 25th, the SLV has seen a decline in holdings of 849.58 tonnes.   The reduction of holdings since April 25th exceeds the amount of silver originally held by the SLV at its inception in April 2006 when it held 653.17 tonnes.

One indication of the amount of forced selling that occurred last week is reflected by the premium/discount on the SLV compared to its net asset value.  On April 25th, when the SLV had peak holdings and silver was surging towards the $50 level, the premium on SLV shares was 1.48%.  Investors at that point were paying $45.83 per share while the SLV’s net silver assets were $45.14.  Two days later and trading at very high volume, investors paid $47 per share for the SLV which held silver worth $44.20, a fat premium of 6.29%.

The first week of May saw a steep price decline in silver caused, in large part, by five margin increases by the COMEX on silver futures trading (see How The Comex Crashed The Silver Market).  Forced selling of the SLV resulted in huge discounts from net asset value.  On May 2nd, the discount on the SLV reached a huge 9.87% and sellers of the SLV were receiving only $42.79  for shares with a net asset value of silver worth $47.51.  On Monday and Tuesday of this week, pricing became orderly with only a minor difference between net asset value and market value of the SLV.

The SLV currently holds 338.9 million ounces of silver valued at $13.3 billion.  Despite the recent sell off, silver has had a spectacular performance this year.   From its January low of $26.68 to its closing New York spot price on May 11th of $35.27, silver has risen by 32%, proving the case for diversification into precious metals.

By contrast, savers of paper currency in banks have been treated to returns of virtually zero, courtesy of Ben Bernanke’s zero interest rate policies.  As the public wakes up to the fact that their paper currency savings are becoming worth less and less, the demand for both gold and silver should increase exponentially.

GLD and SLV Holdings (metric tonnes)

May 11-2011 Weekly Change YTD Change
GLD 1,201.04 -18.90 -79.68
SLV 10,540.48 +153.22 -381.09

Holdings of gold by the SPDR Gold Shares Trust (GLD) declined by 18.90 tonnes on the week.  The GDL currently holds 38.6 million ounces of gold valued at $58.2 billion.

How Much Is A Trillion?

Sometimes a very routine event can open your eyes and keep you on the right long term track.  Last week I was having breakfast in Mexico and casually put a tip of a couple of U.S. dollars on the table.  (Yes, they still take our paper money in Mexico).   Gazing at the paper dollars I reflected on how, as a child, two hours of working odd jobs for neighbors would earn me two dollars.

Then, I tried to figure out how big the table would have to be to hold the $2 trillion dollars printed out of thin air by the Federal Reserve over the past couple of years.   At this point, my wife started getting annoyed with me, so I gladly restrained myself from an academic exercise that was fruitless anyways.   How many people can comprehend a trillion dollars?  Not me, but I know it’s a crazy large amount.  I also know that anything that can be produced in the trillions at virtually no cost cannot have any real long term fundamental value.  And that’s all I really need to know to make me indifferent to a short term sell off in the gold and silver markets.

Comments

  1. IndenturedServant says

    “How much is a Trillion?”

    I’ll leave the question of table size to you but you are going to need a very big and sturdy one preferably with no ceiling above it. Here is what put it in perspective for me…….

    Suppose you wanted to spend one trillion dollars at the rate of one million dollars per day. It would take you 999,735 days or 2739 years! If you figure our debt and unfunded obligations at roughly 100 trillion it would take 273,900 years to accomplish the task.

    A dollar bill is .0043 inches thick so a stack of fourteen trillion one dollar bills would be 952,833 MILES high! This stack would about four times the Earth-Moon distance or 38 times around the Earth at the equator.

    I suggest a LARGE table finely crafted in solid silver, platinum, palladium and gold paid for with the aforementioned fiat dollars.

  2. waterdrop says

    Here’s the answer to your question:
    http://www.pagetutor.com/trillion/index.html

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