Silver's Suddenly Surging Lease Rate is Indicating Silver Bar Shortage at the Exchanges
The implied silver lease rate (the cost of borrowing silver bars on exchanges) has been surging since late December 2023 indicating a silver bar shortage at the exchanges.
When paper (naked) traders are called to make silver delivery on their paper short trading positions they’ve sold into the market, they typically source such silver bars by leasing them, making delivery, and then repaying the metal later with interest when they are able to source such bars from refineries, bullion banks, etc.
As can be seen below at Jan 2, 2024, Silver Miners (prod merc - black) and Bullion Banks (swap dealers - blue) have been increasing their short positions on silver since the beginning of Nov 2023.
None of the silver trading positions are large in historic terms and they have not yet exhibited material sudden change.
It will be interesting to see how this resolves itself.
Promissory silver notes can be offered to market without limit. Real physical silver bars cannot.
Best regards,
David Jensen