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The price of silver has seen a significant increase, rising more than 6% to above $33.6 per ounce. This unexpected increase puts five US banks at risk of significant financial losses from their large short positions in the metal.
What happened: The recent spike in silver prices has led to potential losses for these banks estimated at billions of dollars, according to a report from The Silver Academy.
The Commodities Futures Trading Commission (CFTC) reports that open interest in silver futures contracts has reached 141,580 contracts, each representing 5,000 ounces.
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This amounts to approximately 707.9 million ounces, almost equal to one year’s global silver production. With silver prices up by $1.84 per ounce, these short positions are now estimated to be underwater by $1.3 billion.
“This behavior undermines market integrity and could have far-reaching consequences for both the financial sector and the industries that rely on stable silver prices,” The Silver Academy said.
The concentration of these short positions in just five US banks has raised concerns among industry analysts. Critics argue that this level of short selling artificially depresses silver prices, despite strong industrial demand from sectors such as electric vehicles and solar panels.
“Silver is seen as gold’s relatively cheap brother, and as gold continues to reach new all-time highs and copper hits a 2.5-month high, traders have pushed through the resistance at $32.50,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S, according to a report from Bloomberg.
Concerns about market integrity and possible supply shortages have arisen, with some fearing that a sharp price increase could force banks to buy back large amounts of silver, leading to significant losses.
Why it matters: The rise in silver prices comes against a backdrop of increasing investor interest in precious metals. Robert Kiyosakia renowned investor, predicted a potential stock market crash and emphasized the importance of investing in gold, silver and Bitcoin. His comments highlight a growing trend of investors seeking defensive assets in uncertain market conditions.
