The Silver Short Squeeze: A Historic Market Battle in the Making
Eran Tal

As industrial demand soars and physical supplies dwindle, the silver market approaches a historic breaking point. Could the looming 'silver squeeze' create the investment opportunity of a generation?

In the shadowy world of precious metals trading, a storm is brewing. The silver market, long considered the neglected cousin of gold, stands on the precipice of what could become one of the most spectacular short squeezes in financial history. This isn't just another market manipulation story – it's a confluence of structural weakness, industrial necessity, and growing awareness that could reshape the precious metals landscape forever.

The Banking Cartel's Silver Scheme: Decades of Price Suppression

The story of silver price suppression by major financial institutions reads like a financial thriller, yet it's documented fact rather than fiction. For decades, a small group of powerful banks has maintained massive short positions in silver, effectively acting as a cartel to control and suppress prices. This isn't conspiracy theory – it's evidenced by multiple regulatory investigations, lawsuits, and eventual settlements.

This history of manipulation adds another explosive element to the coming silver squeeze. As banks potentially race to exit their short positions and protect their physical holdings, their very efforts to escape the trap they created could accelerate the squeeze's momentum.

As silver prices rise, these banks face potential billions in losses on their short positions. This could mark the end of the banking cartel's long-running scheme to suppress silver prices. The true price of silver, long hidden by manipulation, may soon be revealed.

The Paper to Physical Squeeze

For decades, the silver market has harbored a dangerous secret: the paper trading world has built a castle on foundations of sand. The disparity between paper and physical silver has reached staggering proportions:

• Paper claims exceed physical silver by 400-450 to 1
• COMEX registered inventories have reached historic lows
• Less than 0.25% of futures contracts typically stand for delivery
• Major banks maintain short positions exceeding annual global mine supply

While banks and traders shuffle these paper contracts back and forth in volumes that dwarf the physical market, the actual metal that underpins this entire system has been quietly disappearing into industrial applications, investment vaults, and retail hands.

The Supply Squeeze

The supply side of the equation looks equally compelling. Several factors are constraining silver availability:

• Global mine production has declined since peaking in 2016
• Only 25% of silver comes from primary silver mines
• New deposit discoveries have fallen 50% in the last decade
• Development time for new mines averages 10-12 years

Meanwhile, growing global uncertainty has reignited interest in precious metals as a safe haven. Central banks continue their experiments with unprecedented monetary policy, while geopolitical tensions drive nations and individuals alike to seek tangible assets. And with silver being a depleting asset, the supply-demand imbalance is poised to worsen.

The Demand Squeeze

Silver is one of the most important elements on the planet, and there is no other that even comes close to its versatility of uses. Even gold, often considered the ultimate precious metal, pales in comparison to silver's diverse applications. Silver's unique properties make it indispensable in numerous industries, from technology and medicine to energy and defense.

Here are just a few of silver's many uses:

• Green Technology: Silver is a critical component in solar panels, electric vehicles, and other green energy technologies.
• Electronics: Silver is used in a wide range of electronic devices, including smartphones, computers, and televisions.
• Medicine: Silver has powerful antimicrobial properties and is used in wound dressings, catheters, and other medical devices.
• Optics: Silver is used to make mirrors, lenses, and other optical components.
• Defense: Silver is used in a variety of military applications, including radar systems, night vision equipment, and munitions.
• Store of Wealth: Silver has been used as a store of wealth for centuries.

As the world continues to transition to a more sustainable future, the demand for silver is only going to increase. With its unique combination of properties, silver is poised to play a vital role in the 21st century.

The global shift towards sustainable energy and technology is driving unprecedented demand for silver. As nations race to secure this critical resource, the old adage "get all the gold" is being replaced by a new mantra: "get all the silver." 

The Squeeze Trigger Mechanism

What could finally trigger the silver short squeeze? The beauty – or perhaps the terror, depending on your position – of the current situation is that it doesn't require a grand conspiracy or a massive coordinated action. Several potential catalysts could initiate the squeeze:

• Industrial Users Stockpiling: As industrial demand for silver surges, particularly in sectors like solar and electronics, companies may begin stockpiling physical silver to ensure supply, reducing available supply for the market.
• Bank Short-Covering: A major bank holding a significant short position in silver may be forced to cover its position, leading to a rapid buying spree.
• Critical Inventory Levels: If inventories of physical silver at exchanges or refineries fall to critically low levels, it can exacerbate supply concerns and drive up prices.
• Coordinated Delivery: A group of large investors could coordinate a mass delivery of silver contracts, overwhelming the market's ability to fulfill physical demand.
• Central Bank Buying: Central banks, particularly those in emerging economies, may increase their silver holdings as a diversification strategy or to stabilize their currencies.
• Geopolitical Tensions: Geopolitical events, such as wars, trade disputes, or natural disasters, can disrupt supply chains and increase demand for safe-haven assets like silver.
• Gold Price Increase: A significant increase in the price of gold can often lead to increased demand for silver, as investors seek alternative precious metals.

Looking Forward

The silver market is approaching a historic inflection point. The physical demands of the green revolution are non-negotiable. The decline in mine supply cannot be quickly reversed. And the paper market's promises cannot be maintained indefinitely. Something has to give.

In the end, this isn't just about profit potential – though that certainly exists. It's about the resolution of decades of market distortion and the reimagining of how we price and trade one of humanity's most crucial metals. When the silver short squeeze finally arrives, it won't just be a market event; it will be a historic reset that reshapes the precious metals landscape for generations to come.

The combination of declining physical supply, increasing industrial demand, and growing awareness of market structure vulnerabilities suggests that when the squeeze occurs, the move could be both dramatic and sustained. For those who understand these dynamics, the strategy is clear: position appropriately, maintain conviction, and prepare for what could be one of the most significant market events of our time.

I am an Associate Professor of Philosophy at McGill University and Canada Research Chair in Data Ethics. I specialize in philosophy of science, philosophy of measurement, and the ethics of big data and artificial intelligence. 

Until 2016 I was a Marie Curie Research Fellow at the University of Cambridge, and before that an Alexander von Humboldt Research Fellow at Bielefeld University in Germany.

Email:  [email protected]  (see my full contact details)

Here you can find my CV, find out about my current research projects or read my recent papers.

You can also find me on Twitter (@erantal). 

www.jpost.com