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The growing physical silver shortage on COMEX driven by BRICS market demand, causing a significant inventory withdrawal and a sharp divergence in silver prices between Western and Eastern markets. JP Morgan is central in this scenario, accumulating silver while potentially capitalizing on the price premium in Shanghai where silver trades at $5–$10 above the Western paper price. Updated forecasts by J.P. Morgan Global Research show a pronounced price revision upward, indicating strong institutional anticipation of a silver price rally, supported by Chinese demand and physical scarcity.
Market Sentiment
Investor sentiment shows a strong tilt towards physical accumulation and strategic inventory management, particularly among institutional players and refiners who are exiting leveraged trades amid rising margins. The market currently exhibits anxiety over the considerable open interest in futures contracts vastly exceeding the deliverable supply, which creates uncertainty about potential delivery squeezes and price volatility. Social media and analyst discourse increasingly discuss a bifurcated market between paper silver on COMEX and physical silver demand in BRICS regions, reflecting hope for a silver revaluation but concern about supply-chain risks.
Past & Future Forecast
-Past: Similar events occurred during past silver squeezes, such as the 2011 silver rally when physical shortages and speculative demand caused sharp price rises. Interventions by major holders and inventory stresses led to eventual corrections once market dynamics stabilized.
-Future: If physical withdrawals continue and JP Morgan’s forecasts hold, silver prices may approach or exceed $80 per ounce in 2026, potentially triggering a delivery shortfall crisis on COMEX. A scenario where 20% of open interest demands delivery could precipitate a liquidity crunch and sharp price spikes.
The Effect
The ongoing physical-synthetic price disconnect may lead to increased volatility in silver markets and contagion to related metals and financial instruments. Prolonged delivery stress could undermine confidence in COMEX pricing mechanisms and elevate physical premiums globally. The role of large institutions like JP Morgan suggests potential market manipulation concerns and heightened systemic risk if a delivery squeeze unfolds.
Investment Strategy
Recommendation: Buy
- Rationale: The fundamental drivers suggest a significant silver price appreciation over the short to mid-term, supported by physical shortages, rising institutional demand, and bullish analyst forecasts. The distinct Eastern premium and large backwardation imply imminent repricing.
- Execution Strategy: Initiate partial entries on pullbacks near key support levels using short-term moving averages (20-day MA) and oversold signals (Bollinger Bands, RSI). Laddered buys during dips will manage entry risk.
- Risk Management: Implement tight stop-losses within 5-8% below entry to control downside; set clear profit targets near resistance levels around forecasted price points ($75–85 per ounce). Monitor open interest and delivery reports closely for any signs of delivery crush or reversal.
- Monitoring: Stay alert to geopolitical developments impacting BRICS metal flows and possible regulatory responses. Adjust stops and profit-taking strategy if volatility escalates or bearish technical signals emerge.
This balanced buy approach aligns with institutional risk management, seizing upside potential while guarding against sudden delivery disruptions or liquidity shocks.#silver #Brics #Comex #JPMorgan