Shanghai Silver Trading Volume Surges By 65% Last Month

Tyler Durden's picture

In the aftermath of the Shanghai exchange's margin hike and trading band increase reported previously, a pair of articles from Bloomberg and the FT looks at the trading of silver in China, where the mostly retail-traded metal continues to be seen as an inflation hedge. From Bloomberg: "Silver trading in Shanghai, which jumped 65 percent in terms of volume last month, will continue to increase on demand for a safe-haven investment, even as the government moves to curb volatility and speculation." And since China's inflationary concerns are unlikely to go away soon, it is only natural that domestic hedging, mixed in with some wild speculation, will continue: "“Chinese investors have piled into silver as one of the
investment choices to hedge against rising inflation,” Shi
Heqing, silver analyst at Beijing Antaike Information
Development Co., said today. The government’s move to increase
margins in an effort to curb volatility won’t affect buying
interest in physical material, Shi said." Sure enough volume has exploded: "Volume on the Shanghai Gold Exchange rose to 33,293 metric tons in April, up from 20,206 tons the previous month, according to data from the exchange, the main bourse in China for trading silver." The FT provides another look at the unprecedented surge in silver trading in Shanghai: "At the same time, silver turnover on the Shanghai Gold Exchange, China’s main precious metals trading hub spiked, rising 2,837 per cent from the start of this year to a peak of 70m ounces on April 26, according to exchange data. The number of contracts outstanding, an indicator of investor exposure, doubled over the same period." In other words, while in the US it is mostly gold that is a pure inflation hedge at both the retail and institutional level, in China, where runaway inflation is running far higher than here, silver is the primary means to cut inflationary exposure. Therefore, nothing short of a full on deflationary episode in China will do much if anything to have a long-term impact on the price of silver.

More from the FT:

The surge in silver prices has attracted investors the world over, from China and India to the US, where the metal has become the investment of choice for Americans distrustful of the actions of the government and central bank. Silver’s stunning rise has inspired a rash of conspiracy theories as investors and analysts struggle to explain the speed and scale of the rally.

Silver trading in Shanghai remains below the levels in London and New York, the two main global hubs, but its rapid growth means its has become increasingly significant in driving prices, bankers said. Turnover in New York silver futures, the most liquid futures contract in the metal, averaged about 700m ounces a day in April.

“I’m pretty certain it’s the Chinese retail [investment] that is driving this move,” one senior precious metals banker said. “There’s an enormous amount of speculation going on out there, they’ve got the bit between their teeth.”

Ms Tully said Chinese investors cut their positions in silver sharply last week as prices tumbled, before returning to the market early this week and driving a short-lived rebound in prices. “No less than during silver’s swift ascent, [Chinese] agency was very evident in its tumbling descent.”

Whether Chinese buying continues “will be a major determinant of whether silver can finally take out $50”, she added.

Ivan Glasenberg, chief executive of Glencore, the commodity trader that plans to float this month, dismissed the drop as “froth” being flushed out of the market, saying that supply and demand fundamentals remained strong.

Of course all of this may just be a dress rehearsal for the big show. As reported before, on May 18th the Hong Kong Merc will start a domestic version of our own Comex. And if speculative froth was heavy now, just wait until this is launched.

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Freebird's picture

In the event of a sale to any ZH reader of the above Panama land, the vendor hereby warrants payment of a 5% commission , payable within 14 days os settlement to this esteemed website.

nope-1004's picture

This email from one of my PM suppliers came this morning:

(We) have gone to great lengths to work with many suppliers which has kept our bullion supply uninterrupted, even when other dealers have been completely without inventory. However, with the "paper" prices of precious metals having been forced down to these levels the market is experiencing a tremendous amount of heavy buying from large investors, both private and institutional. The result has seen much of the remaining bullion removed from the market. This means that Government Mint (Canadian Maples, American Silver Eagles) delays are effecting our supply. The average wait time for products into us is now upwards of 3 weeks on NEW orders processed after today May 12, 2011. This means we are moving our delivery commitment to 4 weeks out.


tmosley's picture

That is freaking hilarious.

"There's no shortage, the market is FLOODED" lol.

slewie the pi-rat's picture

rivers of silver.  world wide.  the last price surge sent granny, tweety, and sylverster going thru everything.  they ended up with a kruger and a 1/10 oz. gold eagle.  granny hid the kruger in the cookie jar.  sylvester has his on a gold chain necklace and is doing cat-disco, and tweety?  tweety sez:  i tawt i taw a takedown, BiCHeZ!

Soul Train's picture

Chinese investors and man on the street don't listen to 70's Rock.

So Ben's Printing Press will one day be yesterday's telex machine.

Check out Ben B playing bass back in '72 to Mr Fantasy.

Of course we are near the end of the dollar currency.

Silver bitchezzzzzzzzzz...........

& Kids rapping in High School Calculus class, - Lord this world has gone nuts

Hearst's picture

Anyone catch this video yesterday of Jeffrey 100 to 1 Christian interviewed on Bloomberg news?  At the end he calls for $26 Silver by years end.  But durring the interview he gets hammered with questions on why the CME raised the margins the way they did.  A noticeably nervous Christian spews forth more nonsense in response.


Funny how this was a headline on Kitco's news reel yesterday, but today it is gone.

suckerfishzilla's picture

Do you think that Christian was baiting the public to buy metal with his claim that the leverage on the comex was 100 to 1?

He_Who Carried The Sun's picture

He Papa, I won't feed your Malaria mosquitoes, so please,

to keep them healthy, you musst go there yourself.

Have fun!

bushboy's picture

Silver Bitchez

breezer1's picture

if it gets too frothy then there will be the stexnet to calm it down.

PaperBear's picture

Take delivery of the physical silver and leave the speculators to be raped by the regulators.

depression's picture

CME is margin hiking itself into oblivion.

cossack55's picture

The chinese citizen, being a low wage-slave, is virtually restricted to silver as their hedge. Kind of like the US.

Al Gorerhythm's picture

The Chinese have a deep rooted affinity and respect for silver. They'll out-buy the US many time over. Yes, they have peasants, butt their middle class to rich ratio is growing and they have but loads of cash. Not only that, if the whim takes them, the may just spend a bit of petty cash in the form of reserves, clandestinely, announcing their purchases on some Western holiday.

Silver bells, Silver bells.....

Dum dum de dum

de da dum dum


Bay of Pigs's picture

This is one of the main reasons to buy silver. When the Chinese started selling silver to their people through the banks it was a game changer. The trolls, of course, ignore this.

Urban Redneck's picture

But how do you say,

"Take delivery of the physical silver and leave the speculators to be raped by the regulators. BITCHEZ!"

In Chinese?

WakeyWakey's picture

had to edit this as comments cannot cope with chinese text so visit this link instead.|zh-TW|Take%20delivery%20of%20the%20physical%20silver%20and%20leave%20the%20speculators%20to%20be%20raped%20by%20the%20regulators.%20BITCHEZ

And for a good laugh listen to both the english and chinese versions :)

Urban Redneck's picture

Hilarious!  Makes me want to play around with xtranormal today.  Not good on a work day.

Eric Cartman's picture

I'm a silverbitch. 

6_7_42's picture

Chinese silver, bitchez!

eigenvalue's picture

Shanghai Gold Exchange lowered the silver margin today. Because according to its rules, if the silver price does close limit up or down, the margin hike of yesterday will be unwound. So not everything is related to conspiracy.

tmosley's picture

Funny how the trolls were telling us all that on the one hand the US exchanges were acting normally and fairly, but on the other hand that the Chinese were "against us".  Funny how a group of people can be so very exactly 180 degrees wrong.  The Chinese exchanges ARE fair, and ours are corrupt as shit.

The CME has reduced silver margins exactly ONCE in the last year.

Al Gorerhythm's picture

The CME has reduced silver margins exactly ONCE in the last year. 

Mustn't have been enough volatility in the market.

Fiat2Zero's picture

The COMEX is corrupt, but this doesn't mean that the Chinese don't manipulate things to their advantage. They just have different goals (like going from 2% gold reserves to more than 70%). Artificially low prices are something that benefits them tremendously.

Chinese pretty much invented corruption. They're actually a lot better at it (and their society is much more tolerant of it).

Gunther's picture

In other words, they follow their publicised rules as it should be.

London Dude Trader's picture

Yeah right, an excellent inflation hedge for the morons that bought at $45 and above.

Al Gorerhythm's picture

Wow. Sharp as a railway line today, mate. I ran out to my stash and nope..... it was still all there.

Just wondering, observant as you are, have you ever considered the following?:


Adam Smith, (a real economist); Wealth of Nations.

Like an impoverished spendthrift,

whose pressing occasions will not allow him to wait

for regular payment of his revenue,

the state is in the constant practice of borrowing of its own factors and agents, and

of paying interest for the use of its own money.


Construct's picture

It is do or die time. This is it for Silver. Now is the time to prove if you will break lose and create the 'Silver standard' in the market like gold has. The gold silver ratio should go down to 10.

nathan1234's picture

The Chinese know that once QE3 is announced they will nlt see these prices for gold and silver again. What use those trillions of paper called US Dollars if they dont use them now.

suckerfishzilla's picture

The use from those trillions in paper provide a revenue stream in interest payments.  The dollar is a rotten egg for sure but since the Chinese economy is dependent on exports to the US they would shoot themselves in the foot if they deliberately tanked the dollar.  It is a standoff of sorts. 

boricuadigm-shift's picture

Not if they develop their own economy... and that is their plan!  3-5 years= USD life expectancy.

youngman's picture

You will see the Chinese buying all of our dips....hell they probably caused them with their computer jockeys....they are tired of paper...theirs and/or ours....silver for the people and I think the government is buying gold...will reign supreme....I also see the new exchange as a huge sucesss.....they no longer trust the USA...I don´t either and we know we can´t trust the EU guys either...if it gets to desperate...they lie....and its desperate out there..just listen to Geitner and Bernanke....if we don´t raise the debt limit...the world will end...

Construct's picture
China is the worlds most powerful producer economy but this is not reflected with their puny little 1000 tons of gold stash. They need to vacuum the market for gold and silver in order to reflect their real power. And this dip is an excellent opportunity for them to do so.
cowdiddly's picture

Um China IS the #1 gold producer in the world and are racing with production in huge mines like in South Africa and buying on the world market to boot. That little 1000 number you read is most likey sandbaged unti they want the world to know much they really have. Thats just how the commies roll mate.They are encouraging their citizens to buy silver as they do not have many good silver deposits. Now if that does not make you go Hmmmm. I laugh my self silly watching these Comex and London scum thinking that they are still in control of the prices. It amazes me how exchanges who do not have any metal think that they are going to determine price going forward.

Construct's picture

They managed to break silvers neck in one week though (five margin hikes, -35% fall silver prices)

cowdiddly's picture

Yes our paranoid idiots are trying to suppress the prices to make it even easier for them. Broke its neck? Nah, your timeline is to American, Try to think like tthe oldest civiliation in the world. On a long enough timeline..............................

Construct's picture

In a way I suspect these prices might be 'cemented' and 'stronger' now with all 'weak' hands out of the game and all the 'leveraged' players wiped out.

tmosley's picture

Hmm, you think that, do you, Mr. 3 weeks 1 day?

Should we all sell our silver?


Construct's picture

You are free to buy and sell as you wish. I have read ZH for almost 2 years on a daily basis. I just registered to be able to comment 3 weeks ago.

Al Gorerhythm's picture

There's seniority in fight club? Who'd a thunk?


tmosley's picture

No seniority.  But no fighting with sock puppets on every appendage either.

Al Gorerhythm's picture

Fuck you Mosely. I was starting to think of myself as someone of importance and then you burst my bubble. Bastard!!!!!!!

tmosley's picture

lol, I wouldn't think of it that way.  You are the center of a whole universe.  Your star may or may not shine brightly in those of others, but you are always the center of your own.

cowdiddly's picture

Yes its cash and carry now. Which will make for a slower, steadly more dependable rise. But do not ever underestimate the Cartel. This is a game for all the marbles as everyone in the world knows the days for the dollars reserve currency status are numbered. Big parts of the world are looking for an alternative. This is where the race for Gold and silver reserves by Russia,China,Mexico,Netherlands or anybody else who plans to be a part of the next generation of world currencies comes from. These guys are not done with thier cheap shots or shenanagins as their desperation builds.