Run on Silver May Collapse Markets Within Weeks

The eight largest traders on the Comex futures market, bullion banks and investment houses, are short more than 50% of the entire market in silver, platinum and gold, according to commodity analyst Ed Steer.  When a group of banks are short more than 50% of a commodity, they control the market and the price, and these dominant players are accustomed to this.  In recent weeks however, all other shorts trading on the exchange have covered.

Commonly longs will roll over their contracts into future months. Now however, shortages of silver have traders taking delivery.  It is likely only a matter of time before those eight largest banks are forced to cover their shorts and doing so could leave many or all insolvent. What would likely play out in the days and weeks following would be something like what happened following the collapse of Bear Sterns in 2008, possibly much worse.

This potentially epic short squeeze, which is being driven in small part by an offshoot of the same Reddit group that orchestrated the squeeze in GameStop on January 27, could being to unfold as early as next week. February 21 is the close date for February silver contracts. This is the date when contract holders decide to roll over the contract to a future month or stand for delivery. February 26 is the date targeted for the House to vote on a 1.9 trillion spending bill. With many “green initiatives,” the bill would take not just a lot of dollars but also a lot of silver. Passage of the bill would make it exceedingly difficult for shorts to defend their positions.

The high short interest in silver is reflected by the difference between price for silver on the Comex and the cost of the physical commodity. Silver is currently trading on the exchange for or $27 an ounce, while actual silver is selling for up to $40 or more.

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