Financial derivatives that involve precious metals, although claiming to represent a physical product, may not have actual metal to back up their redemptions. Silver futures and options are regulated by exchanges that do not require actual silver delivery in order to sell these instruments. Silver prices may be kept artificially low by these transactions.
Some estimate the current above ground silver supply at approximately one billion ounces. This only includes investment grade silver; not silver potentially recovered from silverware, electronics, jewelry and the like. Some estimates indicate that there may be as many as one hundred existing claims for each above ground ounce of silver metal.
Many silver owners are small investors, usually unwilling to sell their stores in the short term. The largest holders of physical silver are the exchanges that trade precious metals paper derivatives. Considering these issues, physical silver would seem to be a good investment, even at today’s elevated prices.
