On April 28th, 2006, Barclays launched the first silver exchange-traded fund in the US. Traded on the AMEX as SLV, the iShares Silver Trust was eagerly anticipated by silver investors ahead of its birth. It ushered in a new era where vast pools of stock-market capital gained an easy conduit into the physical silver market.
One of the reasons investors originally liked SLV so much is silver consumers aggressively lobbied the SEC to kill it. The Silver Users Association wrote some fascinating letters to the SEC bemoaning the birth of SLV as the end of cheap silver as we knew it. Established in 1947, the SUA is an organization of industrial users of silver in applications including photographic, electronic, silverware, jewelry, and other fabrication.
In a February 13th, 2006 letter to the SEC, the SUA’s director claimed its members processed “80% of all silver used in the United States”. In the conclusion of its plea to the SEC to not approve SLV it said, “The Silver Users Association opposes the creation of a silver ETF because of the concerns that doing so will require the holding of physical silver in allocated accounts, thus removing large amounts of silver from the market.”
With SLV generating some controversy lately among a small subset of contrarian investors, remembering how aggressively the silver industrial consumers opposed it prior to its launch is illuminating. The SUA was terrified of stock investors gaining easy access to silver and driving a huge silver spike. It said “the proposed silver ETF could be a legal way for investors to squeeze the silver market.” The SUA knew the silver ETF would take a huge pile of physical silver bullion off the markets, driving up prices.
