The crazy stories have run the gamut around the financial blogosphere. One has JPMorgan (JPM) as a puppet of the Federal Reserve, establishing a huge proprietary short in silver designed to pressure the dollar and reduce costs of monetary easing.
Others have BlackRock (BLK) unable to satisfy its share demand with real silver stockpiles. Many claim that legitimate storage for the metal doesn't come anywhere near the almost 11,400 tons of physical silver that the trust reported holding at its extremes in late April of this year.I don't need to go anywhere near these rumors. The facts about the SLV alone are enough to make a great case for the manipulating effects of the ETF on the price of silver and the strong positives those manipulations can deliver to an investor who doesn't mind being part of a grand plan -- as long as it's a profitable one. Let's have a quick look at the mechanics of this relatively new ETF and how it positively affects silver prices. The SLV looks to represent shares with real physical silver, not derivatives nor stocks of silver miners. The mechanism of connecting shares of the trust to the price of real silver is relatively simple. As investor interest increases, sending shares of the trust higher, BlackRock continues to issue more shares, using that extra cash to buy and stockpile physical silver ingots. The speed with which they will issue shares and increase their physical holdings is dependent solely on how fast the differential moves between the actual price of physically traded silver and the SLV's share price. In fund-speak, this is called tracking the net asset value, or NAV, of the fund. If the NAV tracks too high to spot prices, shares go out to satisfy demand for the fund. And appetites for the SLV have been stunning. Since inception in 2006 and initial stockpiling of 650 tons, the SLV reached its 11,400-ton peak just more than a month ago, an amount that represents almost half of all the silver being globally mined in a single year. Of course this institutional hording system was a tremendous added influence to the price of silver, which recently peaked at over $48 an ounce on April 29.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV