Silver Short Position For Banks Collapses To 16-Month Low

0:00We are quite fortunately seeing a quieter day on the war front today, although in the background, the silver price has been rallying, was up even over $81 this morning if you were up early, yet there have been some big changes going on. With the short position on the Comax held by the banks, and we're going to dig into that today, as well as some rather stunning events that are happening in the silver market, and with the war, which we will touch on to welcome on it. Well, hello there, my friends. Chris Marcus, here with you for Arcadia Economics on Thursday, April 16th, where we have some interesting developments with the short position held by the banks in the silver market, which we will dig into, we'll also get a look at the latest pricing, as well as some rather intriguing developments that are happening out there in the metals world,

1:00in terms of metal that is moving from one place to another, in terms of metals markets that have had disruptions because of what's happening with the war, which it might add, that straight is still closed, it's still blockaded, and as we'll see a little bit later, even on the front of CNBC today, despite yesterday's proclamation that the war could be over very soon, not even any coverage of it on the front, and that is one reason why, I thank you, I want to stay around to the end, because there's a lot of consequences of that happening, and we're seeing it in other metals, so anyway, welcome on in here, and here is a look at a chart of what is called the swap dealer position by the good folks at the CFTC, everybody's favorite government regulatory agency, which I might add is heading that investigation into whether someone was running the oil trades. I haven't dug into that too deeply, although I think I've seen enough that it seems like someone was definitely front running them,

2:00who that might be and what might happen, we shall see, but anyway, the CFTC also puts out what they call their COT report, which shows some various things that can be useful from time to time, and here in this middle row is the swap dealer net, AKA the bank position, or if the banks are short or long, which traditionally in silver, they are short, and the way you read this, the farther down you go here, that's 50,000 contracts short, versus here they were flat, here they were 20,000 contracts long, and the interesting thing is that for a very long time, basically once the bank's got flat or even long, but basically less short would often coincide with a rallying silver, and then traditionally what would happen, the price would go up, they would build that short position, and then you could kind of get an idea that the rally was coming to an end, fast forward a few years later,

3:01I don't know if it's, I mean, now you can see that pattern and a large correlation there, although there are nuances to this, I have to talk with someone that used to run one of these precious metals desks, and he was saying that the banks very rarely have a net directional position, because the short position that they often end up with is the hedge to what they take from the off-take agreement from the mining companies, which I don't think he was lying, and I don't think he was wrong, maybe it's not 100% one way or the other, and maybe there's maybe it's 80% the case, I know TD securities, they took a position, although that was their research desk, not the Boolean bank operation, so either case, I don't think it would be correct to say just when you see the short position get down here that they were short, however,

4:0150,000 times 5,000 per contract number of ounces, what is that, 250 million ounces, I don't think they were net short that much, I don't think they were probably exactly flat either, but what is interesting is that, at least with all that in context, here we can see previously, the most short they had been back in July of 2016, and that was right when our price, now the long-term chart, this doesn't seem like a big deal, but after Silver was getting clobbered from $49 in 2011, and despite 0% rates and quantitative easing, was sitting in the low teens until finally, it broke through 20, at a nice little rally in the first half of 2016, and as it rallied to 20, that was when the banks had set, what was previously the record for largest short position, again, what their net position was,

5:02hey, if somebody is ever able to get that answer, I don't even know that some of the banks, you wonder if they even have, when you factor in all the derivatives, the true net position, but in either case, their short position set an all-time high, then as those of you who have been following this for about 10 years might remember, the price came down quite a bit, that ended the rally, we didn't see $20 again until July of 2020 after, COVID was causing distortions in the market, so anyway, we finally broke that record for largest short position last year, and here it's interesting because, now this is a divergent in the pattern, because normally when you would have, another day perhaps we'll go even farther back and track some of these, but here you had the largest short position and the price kept rallying, which was rather stunning. Also though you can see, you had the largest short position in terms

6:03of Comex contracts, and that's come steadily in over, you can zoom in on this, let's do the one year, and if we go back down, and this is Goldcharts RS, great site, by, don't know Nick Laird well, but good man, I've talked with him a couple of times, and thank you Nick for what you put together here. Here you see that at 23,000 contracts short, that is the least short they've been since back at the beginning of 2025, right here, and you can see the price, kind of hard when you have the 120 stuck in there, it doesn't look like a big move, but you can see that the price did begin rallying, and especially given that we have seen some divergences in the correlation in the past year, and I think we're also in a bit of uncharted territory plus, the fact that the issues in terms of supply have not gone away,

7:05which we will touch on as well in just a moment. I don't know that I would say this would guarantee, or I would see it with less confidence than a couple of years ago, yet we are getting to the less short portion of our chart, which could that facilitate a rally. Usually when the banks are less short, that means the speculative hedge funds are less long, so if they're about to get more long, especially with silver well off the highs, either case, interesting to see that the bank short position has been reduced as much as it has, and anyway, I just wanted to highlight, so you're aware of what is going on there, and we'll see if there's a correlation. I do think there's gonna be some snapback for people make the claim that we're facing something similar to like the December or January before COVID broke out, and then all hell broke loose. There was a couple of months lag, but certain people were seeing it well in advance,

8:09and I think with what's happening with the straight right now, and we'll look at some of the consequences that are already happening. Do think there's going to be some sort of snapback rally with silver still despite being at $78 in the US today, down about a buck. If you woke up earlier, you saw us in $80 territory, which was nice to see, the price got as high as $8103 was over $96 before the war broke out, so then you look at what has happened since the war broke out, and I get it, the demand destruction, there's gonna be some near-term deflation, yet I've thought this is a good entry point, maybe not as good as $20 or $30, but anyway, we have just under $79 silver today, quick look at gold, where we're roughly flat on the day. I call that flat these days, 10 bucks or so, and gold just over $4,800.

9:10Oil price up almost $2 at $9305, and the dollar index down a little bit from the last couple of weeks, we take a look at the one month chart here, had been up around $99, and you can see that it has dropped there there that is March 30th, so it was over par down 2% since then, and anyway, we'll keep an eye on those levels, we'll take a quick look at the bond market for you here, where well off the highs in terms of the yield on the 10 year at $429, and I think a lot of the market is wondering what is happening, and as you'll see shortly, we're gonna go through some of the metal flows first, but you'll wanna stick around because we'll see that a lot of the mainstream media is talking about the progress in the talks. I'm not sure that's accurate. You can check the video we had earlier this week

10:11with Alex Newman, where in terms of why it is difficult right now to see any sort of near term or easy resolution, we dig into that there, but we'll show you what the mainstream media is saying just for fun, and anyway, a few other charts in terms of metal flows, here's the Comex, and you can see we had about 531 million ounces back in October down to 321, so lost 200 million ounces, again, a lot of metal flowed in last year, prior to the tariffs, although we're basically back to where we started before the whole tariff thing went off, maybe 20 million ounces away or so, now obviously a lot has happened since then, silver has been added as a critical mineral, we've had shortages in India, London, China, where there still is a degree of shortage. Now what's interesting is this metal coming out of the Comex has slowed the withdrawal pace a little bit,

11:11can look for March 23rd, we had 331 and three or so weeks later down to 321, even see here was a 2.8 million ounce edition, for while it was just day after day, anywhere between one to four million ounces come out, here you've had some smaller withdrawals, although interesting that year back on April 9th, we had 327.9, and then over the next three days down to 321.7, so over six million ounces in the last couple of days, don't think we're in the danger zone yet, because if you look at the long-term chart, you can see even at the 320 right here, still well in excess of what's been in there historically, yet, when you look at the Chinese inventories, which have gone up, they've added a couple of million ounces, not many, it was under 20, now they're up to 23 million ounces, but for contacts, LVMA got into trouble

12:13when their free float went down to 140 million ounces, and here's China underpinning the industrial market, which as the Silver Institute mentioned yesterday, did have another deficit last year, and is on track for another deficit this year, and they only have 23.383 million ounces in the Chinese vault, so not a lot, here's something else we've been keeping an eye on, this is the holdings of silver in the ETFs, where you can see, got to a peak in mid-January, blue line showing you how much silver is in the trust, gray line is the price, so when the trusts were holding, and this is again, SLV and others like it, the most, when it reached their peak, you're using the silver price with about 85 bucks on its way up to 120, so the metal started coming out before that peak, I don't know that the ETF buyers necessarily have insight into what's gonna happen with the price, I think of that

13:13as the institutional order flow, yet, at least they started selling, which I guess at 85, well, still up now, I mean, if someone was getting short, and again, I'm not necessarily saying that was the case, but did not sell at the peak, I guess, by the time SLV got down to 61 bucks, you were probably happy if you sold at 85, yet. That's what's happening with the ETFs, and we'll certainly keep an eye on that throughout the year, because as we mentioned yesterday in the show, where we dug into the latest report from the Silver Institute, where they had their new numbers, you have the headline number, and then whatever the ETFs do from there, also has a big impact, so, anyway, that's how it's looking. Here's the spread between New York and Shanghai. Getting a little higher was up to 10 bucks, looks like it's come in a little bit today. We have Western Futures at 7860, and Shanghai, oh, this is changed. They have it closer to $11 there,

14:18which is quite intriguing, and that's what this chart shows, where you have this spread, it was not always like this. I know some people claim that that's the VAT, although it changed right around Christmas, which is when the spread jumped, which we've talked about plenty, so, anyway, there you go. Now, in terms of some of the mainstream coverage, I think you'll enjoy some of these, so. Here we have Bloomberg mentioning gold climbs, as push for US around diplomacy, eases the inflation risks. I'm not sure that I've seen much that's happened in the past six or seven weeks, that has eased inflation risk, yet gold gained as a push for a diplomatic resolution to the Ron War ease inflation concerns. They may be pushing, I don't know that they are necessarily any closer, although I guess the fact that US and Iran are considering a two-week ceasefire extension to allow more time to negotiate, is a good thing. There's some other forces at play there

15:18that we talked about in that call with Alex, and take a look at that one for more into that, but anyway, see a lot of the coverage, talking about that ceasefire potentially. Here was yesterday, Trump was saying the Ron War was very close to being over, and that you should go out and buy stocks, yet interesting here on CNBC, and I know some people are saying, well, if I didn't care about the fake CNBC news, hey, I think it's interesting to see what is being shown to people, because there are a lot of people that use that as their primary source, and also in terms of factual news things that are happening, and I think there's that in there too, yet. Here we don't see much about a resolution, and maybe stop 13 ships from passing around the import blockade. So I get it what the US wants to do, they don't want Iran to be making their money with their ships going through, yet in terms of resources available to the world, that has become more constricted,

16:20and here Airlines, he is urged by lawmaker to do lower fares if fuel prices come down, we'll see about that. Although Europe could run out of jet fuel in six weeks, joblessly is not ideal, and anyway, that's what you have on the front of CNBC. They also had that, New York Fed president was John Williams, was worried that the war will slow growth and aggregate inflation. I mean, who could have guessed? Who was filling John in this morning? Great, great analysis from the Fed, helpful as always. We'll be fascinating to see how they respond. I mean, two months ago, we were still on track, well, here's Worsh, seems like he's gonna get his way in there eventually, and follow the wishes of Trump get some lower interest rates, although with oil, and inflation, well, I mean, inflation's been plenty high for long enough, although with the oil price rising, and now the inflation numbers that,

17:20government inflation numbers that are coming out, they make that harder for their rate cuts, although, I go back to the school of thought at the end of the day, and I can let the treasury market fail. So anyway, some other wild highlights. Besson says Chinese banks weren't about Iran's sanctioned risks, so Besson was saying two banks received letters, and we had epic fury, and now we have economic fury, and obviously they've done this with China before, they've done this with Russia just at the same time that Russia and China do seem to be citing with Iran, seems like a slippery slope, not saying that's right or not, just you already had de-dollarization going on years before this started, I would imagine this is not, necessarily the safest, or see how it works out, but terms of consequences, now the aluminum market has entered a prolonged supply black hole, everyone's favorite bank JP Morgan warning about it,

18:21and since the start of the conflict, the aluminum industry has been warning that Middle Eastern smelters would be forced to cut production, if raw materials were choked off for more than a few weeks, which is exactly what's happened, that's helped to push prices in London to a four-year high, which you can see here, and quite a move here, we are at the beginning of the year, and we can zoom in on the three-month chart, so you can see that sure enough, at the end of February, there you are at 3,024, and up quite a bit, up another 10 bucks today, so the aluminum market facing some challenges, we've seen this, I have not, not as much with the other metals yet, given everything that's been going on with silver, and the fact that was part of those strategic mineral stockpiles, I've not seen evidence of disruptions in the silver supply chain, specifically just yet, although we still have the straight closed,

19:24maybe not the biggest silver mining area yet, as we'll see in a moment, there's still other things that are involved in the silver supply chain that are being disrupted, where we see global trade policy reacts swiftly to Iran war disruptions, and they give some highlights here, which I just wanted to touch on, because you get down to this part, alongside this, at least 19 jurisdictions have imposed export restrictions on energy, fertilizer, and agricultural products, then on the demand side, nine Asian economies rolled out, policies to reduce energy consumption, concerning when you start hearing those things, along those lines here, this story came out in money metals with a nice right up of how Chinese sulfuric acid export ban could exacerbate the physical silver shortage, because you're probably wondering what this has to do with silver, as sulfuric acid producers have received notifications about the change,

20:25and the ban could last to the rest of 2026, sulfuric acid key input in copper mining, which is one of the primary sources of silver supply, about 75% of the silver supply comes from mining other metals, rather than silver being the primary metal that is mined, and if you don't have your sulfuric acid, that could be a problem for your copper, and we already had chili, one of the larger copper producers, report output at a nine year low, which added to the supply concerns, and that was back on March 31st, and now we are seeing that Chinese officials have indicate they will stop exports of sulfuric acid beginning next month. So you're seeing these effects trickle in, also in terms of Russia, as I mentioned before, Russia and Iran, US is not going to renew those waivers that they had allowed before for Russian and Iranian oil to pass through, which, at least as far as I can see,

21:27would continue to exacerbate the conditions that are going on here, and anyway, fortunately in terms of some positive news, there is fortuita mining, a proud sponsor of the show that looking forward to, we're less than a month away from their quarter earnings, where you've had the elevated gold price, and while you've had that elevated gold price, which is well in excess of the fourth quarter when fortuna already set a free cash flow record, then they mentioned about, this was last week, that in terms of their production, for the first quarter, they came in with 72,872 gold equivalent ounces, and versus last quarter, when they set the record for free cash flow and profitability in the fourth quarter of 2024, they had 65,130 ounces, so they had about 7.7700 more ounces produced in the first quarter, versus the fourth quarter, and a higher gold price,

22:28so I'm quite excited to see how their earnings come out, that will be early May, plus we are getting closer to their construction decision at their Deomba Suit Gold Project in Senegal, where latest drill results were from late February, they got six grams per ton gold, over 24.1 meters at the southern art, they've also been moving a lot of the money forward to get ready for, if they do get a positive construction decision, and nice to see that they were already growing their gold production, and something that, especially with the Sunbird Project, moving forward at Seguela, they're on track to continue doing that, and we could have a new mine, going into action quite soon, so exciting times for Fortuna, amazing that the stock price, well off of its highs from about two months ago, because since the war began, gold, silver, and the mining stocks in particular got whack pretty hard, so either case will be great

23:30to catch up with the CEO Jorge Genoza, who joins us on the show to go through their latest results. We'll definitely have him on after the earnings, if not before, and to make sure that you're aware of the latest developments, especially if you're looking for leverage on the gold rally, to hear the latest call we did with Jorge, where he walked through the inner dynamics of all these things they're doing, just click on the video that's coming your way now.