Weekly Market Update
By Eli Gal Levy, Series 3 Broker
Silver Futures: Markets Edge Higher in Choppy Week as Investors Digest Heavy News Flow
I was wondering what to write about first this week, and silver futures seem to be an interesting story that is worth noting.
The Silver “Endgame”: Why the Next 96 Hours Matter
If you feel like the silver market is screaming, it’s because it is. After the historic chaos of January 30th—when silver plunged from $121 to the $60s in a single session—we are now entering a second “danger zone.”
As we look at the week ahead, the focus isn’t just on the price; it’s on the physical reality of the vaults. Here is what you need to know for your portfolio.
1. The Ghost of January 30th
Many analysts blamed the late-January crash solely on the “Warsh Shock” (the nomination of Kevin Warsh as Fed Chair). While that was the spark, the fuel was the February First Notice Day. Traders holding February contracts were staring down a deadline: pay 100% cash to take physical delivery or get out.
Because the market was over-leveraged, the “exit door” was too small for everyone to fit through at once. The result? A 30% liquidation event that reminded us that “paper silver” only works until someone asks for the metal.
2. The Shanghai Divergence
While Western markets are still licking their wounds at $87/oz, China is telling a different story. In Shanghai, silver continues to trade at a massive premium—at times 10% to 15% higher than New York. I read that the premium is because China charges a VAT for delivery, but after reading more, I see the VAT is on the buyer who takes delivery, not the seller.
Why? Because the East isn’t trading paper; they are consuming metal. Between the solar boom and EV manufacturing, China’s silver inventories are at 10-year lows. We are witnessing a global arbitrage where silver is being vacuumed out of Western vaults (COMEX) to satisfy Eastern industrial demand.
3. Red Alert: Friday, February 27th
The February contract is settling now, but the real monster is the March (SIH26) contract.
The Date: This Friday, February 27, is First Notice Day for March futures.
Silver – The Math:
There are currently hundreds of millions of ounces of “paper” silver claimed in March contracts, but COMEX registered inventories have dipped below 90 million ounces.
If even a fraction of March holders decide they want the physical metal instead of a cash settlement, the exchange will face a structural emergency.
Market Outlook: We may see volatility over the next four days.
The Bottom Line:
Watch through Friday’s Notice Day. If we don’t get the same result as the last notice day, that may signal that the “weak hands” have been flushed out and the physical buyers are in control. If you’re trading the March contract, ensure you have your exit or roll strategy finalized by Thursday morning. I will be writing an article in more detail on a prominent theory that suggests we are witnessing a fundamental shift in how silver is priced.
Disclaimer: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions and other financial instruments involve substantial risk of loss and are not suitable for all investors. Past performance is not indicative of future results. Carefully consider if trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment.
Opinions, market data, and recommendations are subject to change at any time. I am registered solely as a commodities broker. Any references, recommendations & information contained in this article are of opinion only, should not be considered investment advice. And do not guarantee any profits. |
