We take a look back on silver trading in 2020, and introduce new data suggesting we experienced a real silver shortage in 2020.
Despite COMEX reporting record registered AND eligible silver physical stocks in 2020, the bullion banks panicked and jumped to EFP positions to offset physical delivery risk.
EFP (aka exchange for physical) is price arbitrage between COMEX futures and London OTC physical transactions. But, it can also be used to settle physical deliveries.
The London OTC market is a private transaction market, and as such, the EFP price data is never reported.
This has the effect of allowing huge transfers of physical commodities without spiking the price, in this case of silver. It also allows bullion banks to manage their short futures positions in silver on the COMEX.
We also show, using a study from the Silver Institute, that investment demand for silver exceeded the losses in industrial demand during 2020. Meaning, investors are more than making up for the difference by buying silver coins and bars.
This is HUGE for the price of silver in 2021. Investment demand is what drives silver prices higher in bull markets.
Given the expected real estate market and bank debt problems we expect in 2021, additional investor demand for silver should continue to drive a robust silver price next year.
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