by Eran Tal, Jerusalem Post:
Silver prices soared by over 6% yesterday, breaking through the crucial $33.6 per ounce mark and sending shockwaves through global markets. The surge has put five major U.S. banks at risk of massive losses, potentially in the billions, due to their heavy short positions in the precious metal.
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According to data from the Commodities Futures Trading Commission (CFTC), the open interest in silver futures contracts has reached a staggering 141,580 contracts, each representing 5,000 ounces of silver. This translates to a total of 707,900,000 ounces – nearly equivalent to a year’s worth of global silver production.
With silver prices surging by $1.84 per ounce, these short positions are now underwater by an estimated $1.3 billion. Sources close to the matter report that gold futures are experiencing a similar trend, with paper shorts down over $1.5 billion.
The scale of this short position is particularly alarming given that it is reportedly concentrated among just five U.S. banks. Industry analysts are questioning how such a small group of institutions could take on a short position representing an entire year’s worth of global silver mining output.
See also: Gold Short Position For Banks Reaches All-Time Record
Critics argue that this level of short selling creates artificial downward pressure on silver prices, potentially suppressing its true value despite strong industrial demand from sectors such as electric vehicles, solar panels, military applications, aerospace, and electronics.
See also: Military consumption of silver could far exceed industrial demand
This paradox stems from the disconnect between paper contracts and physical metal. Banks can sell short excessive amounts of ‘paper silver’ without owning or borrowing the actual metal, allowing them to manipulate prices downward even as physical demand surges.
The situation has raised concerns about market integrity and the potential for a supply crunch that could harm industries reliant on silver. Some market watchers fear that a sharp rise in silver prices could force these banks to buy back large quantities of silver to cover their shorts, potentially leading to billions in losses.
As this story develops, calls are growing for increased regulatory scrutiny of these practices to ensure fair price discovery and market stability in the precious metals sector.
The Silver Academy, an industry watchdog group, summed up the sentiment of many observers: “This behavior undermines market integrity and could have far-reaching consequences for both the financial sector and industries that depend on stable silver prices.”
