A surprise 90 per cent slump in the silver inventory of the Shanghai Futures Exchange, where physical metal rather than paper is traded, has silver bulls talking today.

The emptying of the vaults accelerated in the past two weeks with 23 million tonnes taken in the week ending July 25th and another 21 million tonnes in the last week of August, according to the website SRSrocco Report.

Shanghai surprise

Since March last year the silver held by the Shanghai Futures Exchange has crashed from 1.4 billion tonnes to just 148 million:

Experts cited in this report note that the trading volume of the Shanghai Futures Exchange and Shanghai Gold Exchange are nearly three times higher than the volume at the Comex in Chicago, and claim ‘investors are beginning to realize the Comex is nothing but a paper rigged market so they are moving to Exchanges where one can actually acquire physical delivery.’

Not rocket science

But you don’t need to be a hedge fund rocket scientist to see the supply and demand issue emerging in the Shanghai market. Commodity shortages are the very stuff of price inflation.

At first sight it is odd that silver prices have not risen further so far this year with this kind of supply dynamic. But with prices there is often an element of pulling and pulling a brick on an elastic band until it snaps.

Spot yet another reason to be bullish about silver this autumn to add to our previous list (click here).

Related:

Bo Polny’s $2,000 gold and $49 silver forecast for 2014 still on track

Bo Polny is famous among precious metal analysts for correctly calling the tops of 2011 and the bottom for both metals in 2013….read more HERE