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SLV Trade Volume Indicates Manipulation.

In Commentary on May 4, 2011 by CQCA

The silver ETF, iShares SLV, has been mentioned on this site numerous times (Here, here, and here.) Its easily collected trade volume and price movements make it a useful research tool for the overall silver market.

However, recent activity indicates the fund is being manipulated. Mark McHugh, at Across the Street, wrote an article on April 29th titled “Is the SLV Wired to Blow?” He writes:

    “As of this writing there are 364 million shares of SLV outstanding. In the past five trading days (April 25 – 29) more than 755 million shares have been traded, and get this, more than 10 million ounces of silver were taken from the trust between the 26th and the 28th, taking available shares with them.” (Emphasis his.)

The rest of the article is highly informative (and entertaining).

The Silver Coin Investor has alleged that “there have been regular periods when the trust did not have all the silver it should have.”

The prospectus’ rules for redemption seem very open to interpretation.

    “The trustee may suspend the delivery or registration of transfers of Shares, or may refuse a particular deposit or transfer at any time, if the trustee or the sponsor think it advisable for any reason. Redemptions may be suspended only (i) during any period in which regular trading on NYSE Arca is suspended or restricted, or the exchange is closed, or (ii) during an emergency as a result of which delivery, disposal or evaluation of silver is not reasonably practicable.”

Any references to SLV on this site should be considered only as convenient data for research.  Recent market movements indicate that SLV is being manipulated. Since SLV and physical silver usually move in tandem, physical silver is also down 17% between April 28th and May 4th on the London market. However, SLV seems to have been flooded with shares that do not represent actual silver, so there may be a divergence coming between the price of physical silver (something real) and SLV (a promissory note for something that may not exist).

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