Why It Matters
Understanding this dynamic is crucial for investors and traders because a sudden squeeze could drive silver prices sharply higher, creating both risk and opportunity. The episode underscores how limited physical liquidity amplifies market volatility, making the current environment especially relevant for anyone exposed to precious metals or related derivatives.
Silver post-smash outlook
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Hedge fund long interest in silver is within a whisker of a 20-year low, which is fortunate because there is little physical liquidity in Comex vaults, mirroring London’s shortage.
Feb 08, 2026
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Combined with a massive silver short in Shanghai which will have to be closed or physically delivered of more silver than exists in the future exchange’s vaults, last week’s derivative price smash will almost certainly intensify the bear squeeze which is set to return with increased violence. Furthermore, the central banks, sovereign wealth and other very large investors which have been accumulating gold and silver for some time took the advantage to buy more, leaving even less liquidity available.
We shall start with Comex. As stated in the introduction, speculative interest among hedge funds is abnormally low:
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