In the past few days, several people reached out to me asking me to write an article about silver, but initially, I thought I would not have much to add to what I wrote back in June, yes, over 5 months ago, in “THAT SMELL OF SILVER SQUEEZE IN THE AIR“. However, after talking to several commodity traders and closely analyzing the market developments, I changed my mind because I believe I can still provide value to all of you, my dear followers.
Let me share some context first: during the weekend, I posted on X about a rumor that kept circulating in Asia about a trader who allegedly asked for a large physical silver delivery to settle his futures contract expiring in December.
As of the end of the day on Wednesday, the CME still wasn’t reporting any requests for physical delivery tied to the December 2025 contract, as you can see in this table.
However, as you can see in this second table, the CME today reported that on Friday, a request was made to physically settle 7,330 silver futures contracts. This is equivalent to 36,650,000 oz of silver, or about ~30% of the free-float at the COMEX. For those not familiar with this technical term, the “silver free float” refers to the amount of physical silver that is available for immediate future contracts’ physical settlement on the open market, primarily in the LBMA and COMEX vaults.
Was this the reason why the CME pulled the plug during Thanksgiving night, claiming a “cooling issue” with its servers hosted by CyrusOne as the reason for the market not operating for more than 10 hours? Other people and I posted a lot on X about this matter, which, objectively speaking, was totally ridiculous considering CME operations are not only hosted in a Tier-1 military-grade type of server facility with multiple backup systems, but the CME also has backup servers near New York that it could have used to quickly resume operations. As a matter of fact, silver dealers had over 10 hours on a holiday low-volume day to figure out how to deal with the problem of delivering millions of ounces of silver thanks to this “glitch”. Hilariously, CME resumed operations exactly at the same time as the morning daily operation of the FED standing repo facility, where banks can borrow liquidity when they cannot find it anywhere else in the market, closed at 8:30 am EST. A few too many coincidences here, to be fair.
Fast forward to today, Monday the 1st of December, silver spot prices are already trading above $57 after a significant jump last Friday in what was supposed to be a “quiet” half-trading day in the US. Can the silver squeeze continue? The answer is yes, but it will pick up pace gradually.
First of all, there is still a 2,900 open interest on the December 2025 silver futures contracts with the CME currently trading well below the spot price, roughly $56.6 at the time I am writing. If this remains the case, there is a high incentive for the traders holding those contracts to demand physical settlement as well, adding 14,500,000 ounces of silver on top of the total request for delivery to a potential total of 51,150,000 ounces of silver, or more than 50% of what is the currently estimated free-float at the COMEX. This is huge, but it still won’t break the market yet. Not even if by the end of December, the 2,400 American call options with a $60 strike price go in the money, are exercised to buy December futures, and then requested to be physically settled.
The picture changes dramatically if we take a look at silver March 2026 futures contracts. January and February contracts’ open interest is so far rather small, well below 5,000. As you can observe in this table, the open interest for silver CME futures with the March 2026 expiry is 118,815, equivalent to almost 600 million ounces of silver.
To put this into perspective, the total physical silver production in one year is roughly 900 million ounces, and the deficit compared to the total industrial demand has been roughly 200 million ounces a year since 2020 (and is expected to be the same in 2026). After the December 2025 contracts, the COMEX silver free-float can shrink as low as 50 million ounces, with the potential for the one at the LBMA to shrink even further, primarily driven by the high demand for physical silver ETFs.
Let’s put it all together now. On one side, there are industrial companies that must secure enough supply of silver not to risk halting their operations; on the other side, the free-float of physical silver left will be barely enough to cover the silver mining production shortage expected in 2026. This translates into potentially 40,000 CME March 2026 futures contracts being requested for physical delivery. To give you an idea, the highest amount of delivery requests recorded in recent times was 11,458 in July 2020, when the whole world was in lockdown. Here is where we need to start sprinkling some behavioral finance and game theory. If you are a company looking to secure enough supply of silver, what are you going to reasonably do? You will try to front-run your competition and eventually increase the amount of your orders to make sure you will be delivered enough not to disrupt your production. Believe me, many companies have these thoughts, especially in China, where the supply of physical silver is very low right now.
All I said not only applies to all other companies that need physical silver around the world, but the more the silver price rises, the higher the risk of FOMO spreading among retail and institutional investors who are also badly in need of an asset to hedge chronically high inflation that isn’t expected to slow down, because central banks will keep printing money to support government deficits, when stocks, the most favored asset till now, are more and more facing the risk of a serious correction due to valuations completely detached from reality (especially in the US).
To conclude, no one can deny that there is a serious possibility for the silver squeeze to become stronger and stronger in the following months, not even Wall Street banks can avoid acknowledging that, with several already setting $75, if not $100, price targets for 2026. Paradoxically, these are the same banks that stand to lose a ton of money if silver prices continue to rise due to a huge amount of silver short positions in the derivative market, which I discussed back in June. What is the risk that the silver market will completely break and the price flies to the inflation-adjusted all-time high of ~$195? Hard to say. It will depend on the amount of losses dealers in the silver market can absorb, but I would not be shocked if, before that, governments step up and take measures to restrict investments in physical silver, ultimately forcing the price back down to a level where the global financial system does not implode.
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