patrick heller says there is a new buyer in the silver market:

• I received confirmation from one source last week that a new major buyer of physical silver had entered the market the previous week. This new buyer, an unidentified German conglomerate, had not previously purchased silver.

Last Thursday, Sept. 2, there were no deliveries of any COMEX silver contracts, and there were only nine deliveries the day before. In fact, there were 3,002 contracts of open interest on Aug. 31, the day of first notice, but only 292 notices of delivery. Once a contract owner of a maturing contract has given notice to take delivery and made full payment, the party who is responsible for making delivery remains liable for insurance and storage fees for each day’s delay in making delivery. For this reason, the parties who are liable to produce the physical silver have a strong incentive to make delivery as fast as possible. For a company to fail to make delivery might be a sign that it is having difficulty coming up with the physical metal.

• Since mid-June, COMEX silver inventories have dwindled about eight percent. Rather than being a general decline among all dealer inventories, however, the withdrawals have focused on contracts owed by HSBC and Scotia Mocatta, the two banks who are most suspected of not having sufficient physical silver to meet their obligations.

• For July, the ounces of silver traded by the London Bullion Market Association (LBMA) declined by 32.7 percent from already low June levels. The volume of LBMA silver trading in July set a record low for any month since such statistics first started to be compiled in 1996. Although LBMA contracts are supposed to be for the physical delivery of metal, the practice in recent years has been to trade them as paper contracts without taking delivery. Since it was revealed in the March 25, 2010, Commodity Futures Trading Commission hearings that the LBMA only has enough physical silver to fulfill 1-3 percent of all outstanding contracts, it looks as if silver buyers are moving away from paper markets and focusing on purchasing physical metal.

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