Significance of Banks' Sharp Reduction in Silver Short Positions

According to the CME data provided, the silver short positions of the top five U.S. banks have dropped sharply from 34,738 contracts in January to 18,413 contracts, a decrease of 47%. This data change sends several key signals:

• Shift in Risk Preference
  : Large banks are usually regarded as market bellwethers, and their large-scale liquidation indicates that institutions hold a more optimistic attitude toward silver’s future market
• Change in Supply Expectations
  : Banks may foresee a tightening of silver supply and no longer hedge price risks through short positions
• Adaptation to Macro Environment
  : Under the expectation of Fed interest rate cuts, banks have adjusted their commodity portfolio strategies

Silver futures trading volume has reached the annual production level but open interest remains basically unchanged; this unique phenomenon indicates:

• Institutional funds are quietly changing hands
  : Large-order transactions are conducted between institutions, not dominated by retail investors
• Strengthening of Price Discovery Mechanism
  : High trading volume combined with stable open interest shows that the market is looking for a new equilibrium price
• Rising Holding Costs
  : Institutions may choose to liquidate positions due to rising capital costs

From the chart analysis, it can be seen that the current price of the silver ETF (SLV) is $57.73, with an increase of up to 166.65% since the beginning of the year [0]. This astonishing increase reflects the driving effect of large-scale inflows of institutional funds.

The current gold-silver ratio is only 6.86, which is far below the historical average of 50 with a deviation of 86.28% [0]. This extreme deviation indicates:

• Silver is severely undervalued relative to gold
  : From a historical perspective, silver has huge room for catch-up growth
• Supported by Industrial Demand
  : With the green energy transition and growing demand for electronic products, silver’s industrial attributes are enhanced
• Return of Monetary Attributes
  : Against the background of increasing geopolitical uncertainty, silver’s monetary safe-haven value has been revalued

Banks’ short covering operations have directly pushed up silver prices:

• Covering Buying
  : A 47% reduction in short positions means a large influx of buying orders
• Chain Reaction
  : The liquidation of one bank may trigger follow-up operations by other institutions
• Technical Breakthrough
  : Breaking key resistance levels attracts more speculative funds

The flow of institutional funds is reshaping the silver market structure:

• Decline in Position Concentration
  : Reduced holdings by banks may lower the risk of market manipulation
• Liquidity Diversification
  : Participation by more types of investors increases market depth
• Improved Price Discovery Efficiency
  : A diversified participant structure helps form a more reasonable price

• Technical Correction Risk
  : After continuous sharp rises, it may face profit-taking pressure
• Test of the $60 Mark
  : As reported by WSJ, $60 is a key psychological and technical level [1]
• Rising Volatility
  : After banks reduce their positions, the market may enter a new volatility cycle

• Repricing Process
  : The trend of the gold-silver ratio returning to historical averages will support silver prices
• Improved Supply-Demand Fundamentals
  : Industrial demand for silver from green transition will continue to grow
• Strengthened Monetary Attributes
  : In the restructuring of the global monetary system, silver may play a more important role

• Pay attention to the trend of institutional position changes in the COT report
• Monitor historical regression opportunities of the gold-silver ratio
• Lay out investment opportunities in silver-related industrial chains

• Avoid chasing highs; wait for layout opportunities after technical corrections
• Consider diversified investments through ETFs or physical silver
• Pay attention to the development prospects of silver in new energy and electronic industries

The sharp reduction in silver short positions by banks sends an important signal that market sentiment has shifted from cautious to optimistic. This shift not only reflects institutions’ re-evaluation of silver’s fundamentals but also indicates that silver may be undergoing an important repricing process. Against the background of an extremely low gold-silver ratio and large-scale inflows of institutional funds, the long-term upward trend of silver prices is still worth paying attention to, but short-term technical correction risks need to be vigilant against.

[0] Gilin API Data - SLV Silver ETF Real-Time Price and Historical Trading Data
[1] WSJ - “Silver Breaks Above $60, Decisive Moment for 2025’s Hot Metal” (https://cn.wsj.com/articles/白银升破60美元-2025年大热金属迎来决定性时刻-d4ab913f)
[2] Bloomberg - “Spot Silver Tops Record $60 as Traders Bet on Lower Rates” (https://www.bloomberg.com/news/articles/2025-12-09/spot-silver-tops-record-60-as-traders-bet-on-lower-rates)