ted butler explains that the silver etf is short 15-20 million ounces of silver due to the tightness of the silver market. he also substantiates his claim that it was short 25-50 million ounces last year, and used the sell-off engineered in the summer to buy back the metal:

In June, the SLV held 195 million ounces. Over the next three months or so, more than 27 million ounces of silver was deposited in the trust, within the range of what I claimed was owed. Importantly, this increase in holdings came right in the middle of the most severe sell-off of silver prices in memory, with prices falling as much as 40%. There were widespread reports of commodity fund and general resource type liquidation. Previously, strong inflows of metal into the SLV generally occurred on upward price moves, in keeping with normal investor buying behavior. It must be considered unusual for such strong metal inflows to occur on such dismal price performance. Even the big gold ETF, GLD, experienced a sharp and temporary liquidation of 10% of its metal holdings, before rebounding sharply at the end of September. No such sharp decline in holdings was recorded in the SLV.

My conclusion is simple - the short sellers of SLV shares used the occasion of the vicious general commodity selling to buy back silver metal for deposit into the trust for shares they had sold short months earlier. Throw in what must have been straight liquidation of SLV shares, and the upper band of my range of 50 million ounces probably was realized.

http://news.silverseek.com/TedButler...