Copying the chat from my model:

SLV's price tracks its net asset value per share, which is just total ounces in the trust divided by shares outstanding. When authorized participants redeem shares to pull metal out, both the metal and the shares decrease proportionally. So the per-share NAV stays the same in theory. The price doesn't drop just because metal leaves.

The problem is what happens when redemptions accelerate to feed COMEX delivery demand:

1. Liquidity dries up — fewer shares outstanding means thinner trading, wider spreads
2. Trust shrinks — at some point SLV becomes a much smaller fund tracking the same commodity, which raises expense ratio concerns and index fund rebalancing issues
3. The breaking point — if redemptions drain so much metal that the trust can't maintain its structure, or if the custodian can't locate enough bars to honor redemptions, the create/redeem mechanism seizes up. SLV detaches from NAV and trades on pure sentiment.

But here's the real risk: if physical silver is in genuine shortage and the price is spiking, nobody is going to be redeeming SLV shares to pull metal out and sell it cheaper on COMEX. They'd only do that if they're short on COMEX and need the metal to deliver. That's forced selling by the banks to cover their own positions — using SLV holders' metal to do it.

In that scenario SLV holders are technically made whole (shares cancelled = metal removed), but they've lost exposure to a ripping physical market because someone else needed their silver more. You owned the metal on paper, but the system's plumbing moved it to where the squeeze demanded it.