Because a continuously adjusted price would infer a free market where banks could be held responsible for their naked short positions. A midday fix gives them a last minute chance to swing the price in their favor.
The precious metals ETFs are traded using fractional reserves just like fiat. If the price was adjusted continuously via free market based on physical allocation it would be substantially higher and face an enormous squeeze.
That damned fix...
Have we ever thought that they might fix the price to encourage growth of sectors where silver usage is high? Like in the Tech industry? Not that I agree with that line of thinking...of course
The British pulled the silver rupee out of circulation in British India in exchange for paper fiat currency. The freed up silver coins were melted down and dumped on the international market. This crashed the price of silver and devastated the economies of Asian nations where silver was used for savings (and brought on the Great Depression). It also freed up the hundreds of millions of ounces of silver that were needed soon afterwards for the Manhattan project to develop the atomic bomb.