Silver: 5 days to go.The fuse is lit. Silver is tightening. Silver is draining from CME warehouses.
The amount of Registered (i.e. deliverable) silver held in CME warehouses is currently around 88 million ounces. Yet the March open interest is the equivalent of 239 million ounces — nearly three times the available supply.
Nobody knows exactly how many of those longs intend to close their position before the first delivery date. That uncertainty is the shorts' problem. If too many longs stand for delivery, the shorts will be squeezed and the silver price could explode upwards.
Thursday 26th February — First Position Date
This is the last day for longs who do not want to take physical delivery to close or roll their March contracts. From this date onward, clearing firms require that any remaining long positions are held by parties with both the cash and the infrastructure to accept delivery. Speculators and funds who do not want silver must be out by this date.
Friday 27th February — First Notice Day
This is the first day a short can formally notify the exchange of their intention to deliver physical silver. The exchange then assigns that notice to a long. Critically, it is the SHORT — not the long — who initiates delivery. The long who is still open on this date simply receives whatever notice the exchange assigns to them, with no say in the timing.
Once a long receives a delivery notice, they cannot easily exit. They are obligated to take and pay for the physical silver. That is why any long who does not want the metal must be out of the market before this date.
Given the current shortage of registered silver relative to open contracts, it is the naked shorts — those without physical silver — who are in the most precarious position.
If a significant number of March contracts remain open after First Delivery Day (2nd March), we could see an explosive move in the silver price.
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