Given the drubbing that commodities suffered last week in a series of painfully abrupt corrections, it's no wonder that many newcomers to these sectors are running for the exits amid fears that the bull run is over. There was apparently no shortage of sellers for silver,  which got a dramatic 20% haircut -- nearly twice the declines for oil and gold.

Later in the week, however, a shortage of another kind presented itself: Physical silver -- the metal itself -- was reportedly becoming hard to find. By midweek, online precious-metal discussion groups were plastered with reports of neighborhood coin shops that had little or no supply of silver bullion. Reports soon followed that regional and national bullion distributors themselves had run dry. Citing overwhelming demand, the American Precious Metals Exchange has frozen its online ordering platform, while other major bullion dealers are reporting no stock or delivery delays.

An apparent disconnect has emerged between the spot price for silver and its physical availability within the marketplace. Fundamentally speaking, this is a noteworthy development. As economist David Morgan points out in his book Get the Skinny on Silver Investing, the entire supply of above-ground silver bullion worldwide was estimated in 2006 at about 500 million ounces. While mining companies such as Pan American Silver (Nasdaq: PAAS) and Hecla Mining (NYSE: HL) are busily producing all of the silver they can to satisfy demand, a significant chunk of the existing silver is tied up in funds and exchanges, including the iShares Silver Trust (AMEX: SLV) and the Central Fund of Canada (AMEX: CEF).

As the present shortage of physical silver suggests, the combined effect of industrial demand and increased investor interest may be outpacing the supply chain. If that's the case, then the recent decline in the silver spot price may not last as long as many observers anticipate.

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