well, how can you purchase silver, if you don't have the capital? PSLV needs to do the offering, get the money. then, they go out and buy. So, it makes perfect sense to me, that they can't get silver all at once. And they shouldn't, since others will just front run his trade and drive up the price.
Every SLV share is backed by allocated and independently audited physical silver. Since the silver market is assumed to be rigged, people blindly assume that SLV must somehow be fraudulent. All the documentation says differently. The people who think SLV isn't backed by silver should maybe look in the mirror for their answer. It's those who hold SLV in a margin account. You would think after the MF Global fiasco people would learn. When you hold your shares in a margin account you are authorizing your broker to lend your shares. A key feature of any margin account agreement is the "hypothecation and re-hypothecation" clause. This clause allows the broker to lend out your securities at will. Your investment then becomes 100% paper, backed only by the full faith and credit of the borrower of your shares. So, there is no "missing silver" in the SLV vaults when your shares are borrowed. You have voluntarily and willingly disposed of your shares (thus your interest in any physical silver) in exchange to be an unsecured creditor of the party who borrowed them. SLV is not allowed to lend/lease silver from the trust, but shareholders ARE allowed to lend their shares. If for example if JPM needed 5 million ounces of physical silver, but couldn't come up with it right away, they could borrow 5+ million shares of SLV and as an authorized participant, just redeem those shares with the trust for the physical silver that backs them. No harm - no foul. The "former" shareholders authorized them to do that. Your margin account brokerage statement will still say you have SLV, but those shares are gone. They no longer exist. They've become 100% paper. Just as happened with MFG, these people have authorized their broker to borrow and gamble with their assets. This all works transparently behind the scenes until (like MFG) the counter party who borrowed the shares goes bust, then you'll just have to wait in line with all their other creditors for any remaining scraps. SIPC doesn't insure shares that you've disposed of. If the shares were sold short by the borrower, then the new owner has full title to them and is the party covered by SIPC.
The moral of this story is: Don't sign a hypothecation agreement. Don't hold metal ETF's in a margin account.