The Silver Short Squeeze: Only 14% of Futures Are Covered
Silver futures surged previous $117 on January 29, extending a historic rally with 275% positive aspects over the previous yr. A extreme bodily provide crunch is driving the surge. Warehouse stock now covers simply 14% of excellent futures positions.
A confluence of depleted inventories, outsized industrial brief positions, and weird backward contract rolls factors to a textbook brief squeeze now unfolding in actual time.
Warehouse Inventories Under Pressure
According to the newest CME warehouse stock report dated January 27, whole silver holdings in COMEX-approved depositories fell to 411.7 million ounces. More critically, registered stock—the one steel accessible for instant supply in opposition to futures contracts—dropped to 107.7 million ounces.
Registered shares fell by 4.7 million ounces in a single day. Metal was both withdrawn from vaults or transformed to eligible standing. Eligible silver just isn’t accessible for futures supply.
With whole open curiosity standing at 152,020 contracts (equal to 760 million ounces), the registered stock covers solely 14.2% of excellent paper claims. This implies that if even a fraction of futures holders demand bodily supply, the change might face extreme operational stress.
Commercial Short Positions Exceed Deliverable Supply
Data from the Commodity Futures Trading Commission (CFTC) Commitments of Traders report, surveyed on January 20, reveals the extent of the short-side strain.
Commercial merchants—primarily banks and sellers—maintain 90,112 contracts brief in opposition to 43,723 lengthy. Their web brief place totals 46,389 contracts, or about 231 million ounces.
This web brief place is greater than double the 108 million ounces of registered silver accessible for supply. Should longs aggressively stand for bodily settlement, brief sellers could be compelled to supply steel in an more and more tight market, probably accelerating value positive aspects.
Backwardation and Backward Rolls Signal Stress
The silver market has remained in backwardation—the place spot costs exceed futures costs—since early October. This pricing construction signifies instant bodily demand is outpacing provide, a situation hardly ever sustained in regular markets.
Analysts have noticed futures contracts rolling again from March to January and from February to January. This uncommon sample suggests lengthy holders are unwilling to attend for later supply dates.
In January alone, 9,608 contracts representing 48 million ounces have been issued for bodily supply—almost 45% of the present registered stock.
Solar Industry Feels the Pinch
The provide squeeze is compounded by relentless industrial demand. Silver now accounts for a file 29% of total solar panel production costs, up from 14% final yr and simply 3.4% in 2023.
This surge has made silver the one largest price part in photovoltaic manufacturing, exceeding aluminum, glass, and silicon. Major Chinese producers, together with Trina Solar and Jinko Solar, have warned traders of anticipated web losses in 2025 and 2026.
In response, Longi Green Energy introduced it would start mass manufacturing of copper-based photo voltaic cells within the second quarter of 2026. However, trade analysts observe that such substitution efforts sometimes take years to scale, leaving near-term demand dynamics firmly tilted towards bodily silver.
Gold Remains Stable by Comparison
In distinction, gold reveals no indicators of related stress. COMEX gold warehouse stocks whole 35.9 million ounces, of which 18.8 million are registered. Against an open interest of 528,004 contracts (52.8 million ounces), the protection ratio stands at 35.7%—greater than double that of silver.
Gold futures stay in contango, the conventional market construction the place futures commerce above spot costs. Daily stock actions have been minimal.
Outlook
The structural deficit within the silver market—now in its fifth consecutive yr in line with the Silver Institute—continues to attract down above-ground stockpiles. With lease charges elevated and bodily premiums widening throughout international markets, the situations for additional value appreciation stay in place.
However, merchants ought to observe {that a} market this stretched can be susceptible to sharp corrections if profit-taking accelerates or exchanges intervene with place limits or margin hikes.
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