(17 February 2012)
In Section 10 of the article The Many Values of Gold, we have estimated the velocity and the inverse reserve ratio of the COMEX gold futures and used these in order to estimate the corresponding quantities at the LBMA.
Just for fun (and only for fun!), let us calculate the analogous figures for silver. As of 17 February 2012, COMEX Open Interest was 107137 contracts (536 million ounces) and daily trading volume was 49273 contracts (246 million ounces) for a ratio of 2.2. Using the LBMA clearing volume of 197 million ounces (December 2011), we arrive at an estimate of 13500 tonnes worth of silver in unallocated LBMA accounts.
As of 17 February 2012, the ratio of the COMEX open interest of 536 million ounces per COMEX registered inventory of 35.1 million ounces (16 February 2012) is 15.3. With the London silver fixing of US$ 33.48 per ounce, this would give an estimate of US$ 512.00 per ounce for the free silver price.
The free gold/free silver ratio would therefore be 64. Finally, the very rough estimate for the physical silver reserve of the LBMA institutions is 880 tonnes.
Finally the disclaimer in detail: This calculation was done for fun only. You know that there was no leak from any insider that would have suggested that COMEX and LBMA data were comparable and that the majority of unallocated account holders at the LBMA were just waiting for allocation. Furthermore, central banks do not hold any silver as a reserve, and it is therefore very unlikely that silver will play any role in recapitalizing the banking system and in settling trade balances in the future.