gene arensberg comments on the silver market:

It is rather troubling to us that the open interest for silver remains somewhat subdued. This is speaking relatively, of course. There is no way in Hades that even a small fraction of that much silver could actually be delivered in to the market in any given year. Not at these prices. There are simply too many demands and obligations on all the known silver bar stock inventory. Private stocks are probably also similarly burdened although the vast majority of those reside in the opaque OTC markets in London and are difficult to know.

From actual reports by our colleagues and from anecdotal comments from large traders, we believe that physical demand has been quietly near intense of late and yet we do not see it reflected in the COMEX open interest! Neither do we see it reflected in the amount of bullion being accumulated by the world’s silver ETFs. We find that odd and unnerving to an extent, adding to our caution level. Robust silver bull markets are usually marked by rapidly rising open interest in silver futures, not milquetoast sideways “action.”

Ironically, silver may have a hard time breeching its resistance unless the open interest was to rise materially. We stand ready to be corrected by that statement, but doubt we will be. Look for increasing open interest for silver as a more bullish than bearish signal then (and vice versa) and trade accordingly just ahead.
For what it is worth, one savvy trader we correspond with in Europe suggests the reason that the silver open interest is subdued is the possibility that a larger number of long traders are accumulating long options, forwards and futures positions for actual delivery later this year – something we have speculated about. If true that does require considerably more capital to do than spec trading and thus, less “horsepower” to take on more futures. We’ll see on that soon enough.

http://treo.typepad.com/got_gold_report/2010/06/20100612COTflash.pdf