Is silver ending the paper game?

Events in recent weeks culminated with a crisis for silver derivatives in New York, London, and even Shanghai. Could it be the beginning of the end for the entire derivative complex?

Introduction

Either it was a deliberate plug-pull, or just awful timing for the CME’s database to go offline coinciding with the most dramatic silver squeeze seen so far following weeks of backwardation between London spot and the Comex December contract. Rumours abounded, including one in Shanghai that there was going to be a very large stand for delivery.

It turned out that there was one, or several together amounting to 7,330 contracts, which is for 36,650,000 ounces (1,139.93 tonnes) valued at over $2 billion. This is not a record, which was 11,692 contracts on 30 April valued at $1.9 billion at the time. The difference is that back in April the threat of tariffs unlocked global liquidity which flowed to New York in large quantities and were readily available. This time there is no liquidity. This is evidenced in the chart below, which shows how the squeeze on silver has developed on Comex: