What is the Silver Squeeze? Market Phenomenon Explained

19 Mar What is the Silver Squeeze? Market Phenomenon Explained

The Hunt brothers faced charges from the IRS and CFTC for their efforts to corner the silver market and trigger a silver short squeeze. In several of the examples we discussed on this page, a combination of manipulation and natural market movements drove short squeezes. Markets for nickel (the metal) also experienced a notable short squeeze. After the invasion of Ukraine by Russia in 2022, markets reacted by buying more contracts in nickel, since nickel is a vital wartime component used for weapons, vehicles, and other gear.

• And they stack up all these terms on top of each other and create this weird soup that doesn’t even necessarily make any sense.
• As the chart below illustrates, silver has repeatedly attempted to break above the $32–$33 resistance zone, only to be slammed back down each time—except for the current breakout attempt (the outcome of which remains uncertain).
• There is a strong chance that these banks will end up on the wrong side of the trade as this rally continues, triggering a powerful silver short squeeze.
• Investor relations activity often intensifies during squeezes as mining companies leverage market interest to highlight production capabilities and growth potential.

For a genuine silver short squeeze to occur, prices would need to climb quickly and considerably beyond the typical market movements we’ve observed. Even the 11% price increase during the 2021 Reddit-driven attempt proved insufficient to trigger a true squeeze. Those interested in understanding this further might consider exploring the investing vs speculating dynamics that drive market behavior. Refineries represent the critical bottleneck in the silver supply chain, determining whether raw silver becomes investment-grade bars or industrial products. During supply shortages, refineries typically prioritize industrial customers with long-term contracts over investment demand.

Editor’s Picks: Gold Hits New High, Silver Squeeze 2.0 Next Week?

We harness advanced technology to enhance the speed and accuracy of our reporting. With unemployment approaching the Fed’s projected year-end target of 4.4%, pressure is mounting for more accommodative policy. Recent Personal Consumption Expenditures (PCE) data – the Fed’s preferred inflation gauge – has shown moderation, potentially providing cover for rate cuts in the latter half of 2025. Jim Thorne, chief market strategist at Wellington-Altus, discusses which assets investors should focus on in today’s tumultuous environment. Dr. Phillip Magness of the Independent Institute discusses the impact of US President Donald Trump’s latest round of tariffs, outlining their potential effects on the economy and stock market.

Social media platforms allow retail investors to organize more effectively than in previous eras, potentially mobilizing collective buying power with minimal institutional involvement. Dollar-cost averaging provides advanced candlestick patterns mechanical discipline during extended squeezes. By continuing regular purchases regardless of price action, investors reduce emotional decision-making while potentially improving average acquisition costs across market cycles. This approach aligns with effective investment strategies for volatile assets.

By every measure, gold is in a confirmed uptrend, and I believe it’s on track to reach $3,000 in the near future. While gold reaching $3,000 might a bit far-fetched, it’s actually quite realistic, as it’s just over a 10% increase from today’s price. By every measure, gold is in a confirmed uptrend, and I believe it’s on track to reach $3,000 in the near future. When the price of a stock, asset, or commodity rises especially quickly, it can trigger what’s called a short squeeze.

Institutional Investor Reactions

By staying informed, exercising prudence, and adopting a disciplined approach to investing, individuals can navigate the silver market with confidence and seize opportunities for long-term growth and financial stability. What follows is a cyclical pattern where the price of silver rises and forces more traders to sell their short positions or buy more stock in the appreciating asset, which, in turn, drives prices even higher. Note that the silver dumped onto the market was “paper” silver—futures contracts largely unbacked by physical metal. This is the primary way bullion banks artificially suppress silver’s price, keeping it well below where it should be based on true supply and demand for physical silver.

Electronics manufacturers, who rely on silver for components like circuit boards and conductive pastes, experience cost pressures during squeezes. With silver representing a small but critical input for many finished goods, manufacturers must either absorb margin compression or attempt to pass costs to consumers. For silver to reach the extreme price targets suggested by squeeze advocates, fundamental market structures would need to change dramatically.

Approximately 60% of annual silver supply goes to industrial applications, while investment broker liteforex demand accounts for roughly 25%. This split between utilitarian and monetary demand introduces volatility that other metals don’t experience. During a squeeze, retail and institutional buyers simultaneously increase physical silver purchases, depleting dealer inventories and forcing suppliers to source additional metal at higher prices.

And every day there’s a new group of people that come to gold and silver for whatever reason, their buddies have been bugging them or they see what the Fed is doing. Futures market positioning provides additional insight, particularly when Commitment of Traders reports show concentrated short positions coinciding with increasing open interest. This combination creates potential vulnerability to squeeze dynamics if buying pressure mounts against leveraged short positions. Position sizing represents the foundation of risk management during volatile silver markets. Limiting initial investment to capital that can remain committed through market cycles helps prevent forced liquidation at unfavorable prices if squeezes reverse suddenly. Exchange-Traded Funds (ETFs) offer convenient silver exposure without storage concerns, but their performance during squeezes varies based on structure.

What’s best for Investors?

This widening of spreads increases transaction costs for all market participants while providing a buffer against rapid price movements that could otherwise create trading losses. Manipulative squeezes often involve strategic purchase timing to maximize market impact. Buyers might target periods of low liquidity or coincide acquisitions with scheduled market events like futures contract expirations, amplifying price movements through forced settlement activities. Gain immediate alerts on significant ASX mineral discoveries with Discovery Alert’s proprietary Discovery IQ model, turning complex data into actionable investment insights.

COT Gold, Silver & USDX Report – April 18, 2025

Silver is a heavily shorted asset, and Reddit investors believed that they could cause a silver short squeeze by buying both physical and paper silver. In a sense, the plan was successful; the stock of iShares Silver Trust (SLV) rose to a nine-year high by the end of January 2021. In London’s metals exchange, silver gained nearly 11% by the beginning of February. However, if that stock’s price increases drastically, it can cause short sellers to lose money by having to buy back at the higher prices to minimize losses.

• An advocate for free markets and sound money, Colombo was also named one of LinkedIn’s Top Voices in Economy & Finance.
• This time around, the push seems to have originated on X, formerly Twitter, where it’s quickly gained traction among key players in the silver community.
• Elsewhere in the precious metals space, silver is spending time in the spotlight as social media users plan a “silver squeeze 2.0” for this coming Monday (March 31).
• This market structure stabilizes prices, making extreme volatility less common.

How does physical silver purchasing affect a potential short squeeze?

“The participants are more sophisticated, patient, and understand the structural deficiencies in the silver market far better than the previous wave of retail investors.” Spot silver prices are up 12% so far this year after rising 21.5% in 2024. They are supported by the gold price rally, driven mainly by uncertainty brought by Trump’s tariffs, which boosted gold’s safe-haven appeal. A key condition for a short squeeze is the presence of unusually heavy short positioning in the asset. The basis (blue line) is the abundance of the metal to the market, and the cobasis is the scarcity. The green line is the price of the dollar in silver terms (inverse to the conventional price of silver in dollar terms).

Unlike equities, silver doesn’t experience quarterly earnings reports or other regular catalysts that typically trigger short squeezes in equity markets, making genuine silver short squeezes relatively rare occurrences. Even more exciting is the fact that silver’s logarithmic chart, dating back to the 1960s, reveals a cup-and-handle pattern, indicating the potential for silver to reach several hundred dollars per ounce during this bull market. In order to confirm this particular scenario, silver needs to close decisively above the $50 resistance level.

During a genuine silver short squeeze, a disconnection often develops between paper silver (futures contracts) and physical silver prices. This “premium spread” can be one of the most reliable indicators that a true squeeze is occurring. A short squeeze occurs when an asset’s price rises rapidly, forcing traders who bet against it (short sellers) to buy the asset to cover their positions. This buying pressure further drives up prices, creating a cyclical pattern that accelerates inside bar trading strategy the asset’s rise in value. Short traders can lose significant amounts of money during these events, as stocks have a floor ($0) but no definitive ceiling for potential losses.

If you’re active in investing communities, you’ll probably hear the term “short squeeze” quite a lot. Every year, analysts who are bullish on the price of silver sound the alarm that a silver short squeeze may be happening and that prices for the precious metal may start to rise. More often than not, silver bulls use the term to build excitement in the market and, sometimes, to influence the spot price of silver to increase. If the buying pressure is strong enough, it could even lead to a short squeeze, dramatically amplifying silver’s upward momentum. Given the sheer size of their short position, bullion banks stand to lose approximately $211 million for every $1 increase in silver’s price—a setup for a major price surge.