Silver ETF sees huge sell order

Precious metals trading opened on a firmer footing this morning following overnight dips to near recently formed price support areas. The market’s tenor was, however, on the nervous side as players eyed lingering profit-takers still in action and remained focused on the US dollar and oil values. Spot gold dealings started the Tuesday session with a minor, 90-cent loss per ounce, quoted at the $1,464.40 mark on the bid-side.

Without thus far providing details as to the allocation of funds, the Balkans News agency reported that the International Monetary Fund started discussions on how and to whom to dole out $2.79 billion of windfall profits that have resulted from its recently concluded gold sales. The IMF is said to be considering three options at this time.

At the 8:20 NY time, silver advanced by 43 cents to open at the $40.65 level per ounce. The white metal had dipped to one penny under the $40 mark in overnight trading after having raced across a $2 range on Monday. A gargantuan bet against silver values was placed into position yesterday with the initiation of a one million-share-large put on the iShares Silver Trust (SLV) – at the $25 level by July. The bet constituted the largest single options trade on US exchanges and came as silver was touching the 31-year high watermark near $42 per ounce.

The (as yet) unidentified buyer of said puts is in effect counting on a 37% decline in silver prices by that timeframe and is perhaps reinforcing the UBS-originated opinion issued yesterday, that ‘“it takes a brave investor to buy silver right now.” Mind you, it also takes some guts to go up against the vertical wall of speculation currently manifest in the white metal. However, as they say at the Montreal casino: “Faites Vos Jeux!” – The bet is on and time will tell who walks away shirtless, or loaded.

ABN AMRO’s monthly report on metals projects 2011’s supply and demand tonnage figures and summarizes the still-in-surplus silver market conditions as follows: Mine supply of silver is forecast to rise to approximately 24,000 metric tonnes, secondary (scrap) supplies are estimated to reach 11,370+ tonnes, and government silver disposals are estimated to reach 350 tonnes (a 40% jump from 2010’s sales levels).

Meanwhile, silver demand from jewellery and silverware is projected to reach 7,218 tonnes while industrial demand for the metal is estimated to climb to 12,543 tonnes. Taking into account an investment demand level about on-par with that seen in 2010 (roughly 8,600 tonnes), the silver market in 2011 is projected to show a “residual” overhang of 7,333 metric tonnes. A shortage of silver that is certainly not.

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