FMX Exclusive: Silver Contango Crushed – Short Squeeze Imminent Or Position Limit Ruling Fall Out?

Tyler Durden's picture

Courtesy of our friends at FMX Connect.

Silver Contango Crushed – Short Squeeze Imminent or Position Limit Ruling Fall Out?

In silver, the contango was hit hard about 3 AM this morning  with 2 year futures coming in as much as 15 cents relative to spot. The Z11/Z12 futures spread settled 21.40 yesterday and the market today is 13/15. The H/Z futures spread settled 19.2 The market today is 9/11.

What could cause this?

Factually speaking, 2 reasons cause contango to collapse. The first is interest rates and interest rates would have to decrease a large amount for this type of move in the spreads. The second is delivery concerns. When a producer, bullion dealer, or speculator is short the front month, come expiration, it has a a choice: make delivery or don’t make delivery. There are 2 ways to avoid making delivery, Reissuing, which is essential covering shorts, and deferment. Deferment involves leasing the metal from someone else or rolling your short to a back month.

Last time we saw a contango move this significant was in 1997 before Warren Buffet took delivery. While more information is needed, and this could be a fake out we think the spread’s move is important. It happened during Asian hours and the Asian market has shown strong physical demand. If this continues in conjunction with higher lease rates you will more than likely see a short squeeze. There is another less exciting reason it could be happening. Additionally, it could be related to the CFTC position limit ruling. Silver position limits will be implemented in 2 tiers. The first tier is a limit on front month contracts. The 2nd tier limits the aggregate number of contacts for all back months combined. Someone could just be moving their position around to deal with the new regulatory structure. Our conclusion is that we are going to have a short squeeze or increased volatility in the spread market as major players shuffle their open interest around. Stay tuned..


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Turd Ferguson's picture

Very helpful and interesting post, Tyler. Thanks.

nope-1004's picture

Looks like the JP Morgue's are junking like crazy.

I found Franklin Saunders' analysis very informative, in addition to you Turd.

I don't really care if silver corrects downward $2, $4, or $8.... in the long term, buying is the only protection against this corrupt banking cartel and the only empowering way I can contribute to bring the bastards down.

I've been buying over the last week and will continue.


Triggernometry's picture

Agreed, I've been buying since september, and I see no advantage in slowing down for corrections any time soon.

SheepDog-One's picture

Max Keiser knocking on JP Morgue's front door with a tank.

Turd Ferguson's picture

Trolls are getting thick here, Jimi.

tmosley's picture

Honestly, there are only a few.  It's just that they work very hard at it.

Mr Lennon Hendrix's picture

So go trolls and strippers...

Hephasteus's picture

Yep it's not the number that is telling. It's the deperation level.

tallystick's picture

Need a decent photo of Ms. Blythe Masters to create her character for the movie.  Ya got anything turd?

Sean7k's picture

Them and the serial pasters. Whatever happened to citations? I'll read if if I'm interested.

Richard Head's picture

Max keiser should cease being promoted until he answers up regarding those silver coins he shilled for.

SheepDog-One's picture

'Answer up' for them? He got no proceeds from any sales, good enough for ya?

Botox4U2's picture

Again, Max Keiser might like to explain why he is taking advertising dollars from James Turk who does not support the Crash JPMorgan campaign (see below). Is this because GoldMoney is just another bank type account in a tax haven?  Maybe they have physical gold and silver, maybe not as much as they say who knows? What is more important is that Americans caught having this account in Jersey, Channel Islands without filling out the critically important FBAR reports on foreign bank accounts risk jail and huge fines. Funny that Max or James don't mention this. Here is a link to this information. BTW this is NOT the IRS, this is The Office of Homeland Stupidity. PLEASE NOTE THE DEFINITION OF "U.S. PERSON"

So.......US persons beware owning offshore accounts. If you need to open an account anywhere to buy precious metals in, including ETF's, THEN YOU DON'T UNDERSTAND GOLD AND SILVER. To those who think they are sheltering their gold and silver from the IRS, forget about them, it's DHS you are dealing with and if for some reason the US government wants to outlaw owning PMs and closes down access to vehicles such as GoldMoney you will lose your claim to the metals and risk fines and jail. So, buy physical and bury it in your yard


From James in an email

"I am in agreement with the importance of buying physical silver, but I don't agree that people's ire should be directed toward any one institution (he's referring to JPM), regardless of how flagrant it has become.  There is a bigger issue here in my view, namely, that the US gov't is running amok.  Therefore, the bullion bank actions are simply the result of an out of control gov't.  Blaming any bank is like blaming wet streets for rainy weather. I am by the way a big fan of Max.  He has done wonders in educating people around the world about the problems faced today.  But I cannot in good conscience support this particular effort. Regards James" Uh James, JPMorgan IS the government.


MGA_1's picture

You know, JPM might actually be the front for someone else...

Sean7k's picture

Tough market when you can feel fraud, but not see it or determine it's purpose.

rich_maverick's picture

You know the purpose of the fraud.  Just not how much longer can the bankster keep playing their shell game with silver.  Leasing from one sucker to pay off another can only last so long.  Who is stupid enough to lend silver right now?  If they do lend, at what rates?

Sean7k's picture

I honestly only have suspicions. The problem is just how long they have played this game. Just as todays POMO auction demonstrates, they can steal money in broad daylight and only a few people are aware. The MSM won't report it-they can depend on it.

The movements out of Comex are bizarre. The transfers of physical to foreign countries. The CB's attempting to cheat each other by promising to store gold for junior holders. The leases are fast and furious, yet Blythe can still do the 10:00 am dump whenever she wants.

There is zero transparency, the CFTB is complicit. The creation of credit on a global scale is off the galactic charts- not only does it not bleed through to be seen, the only obvious purpose is a complete failure of all major currencies and the creation of an international one.

However, the endgame is not that simple. Wars start over things much less than this. What is the role of PM's in all of this? Will they find a way to exclude them? They have been successful in excluding them through legal tender laws. Will the real squeeze happen in a way we never considered?

Oh regional Indian's picture

Excellent observations Sean7K.


bigdumbnugly's picture

ditto that.

i have been asking the same questions without getting satisfactory answers - because there probably aren't any satisfactory answers.

the only certainty is that a jpm. hsbc, gs, sovereign, whatever ptb, is not going to take it in the ass without doing whatever is necessary to transfer the deep plunging onto some lesser being's keyster.

i don't think anyone can really know exactly what they are capable of pulling off.


jmac2013's picture

"Bring out your dead!" Bernanke yells on POMO days to the primary dealers, referring of course to their government debt.


RockyRacoon's picture

Interesting stuff.  With all the volatility I find solace in flipping the silver Eagle pocket-piece that I carry.  It sure is stable and doesn't seem to change a bit over time.

Sean7k's picture

I've been trying to get my son to buy some silver, so I finally tossed him an ounce. His first remark? Wow, this really feels like money. Hopefully, he'll be tossing a few more soon.

TheDriver's picture

My daughters get 1/2 oz rounds each month as their allowance. Our agreement is that they may convert it to fiat at any time based on current the spot price. For the last three years, they've yet to trade it for cash.

quasimodo's picture

I do the same thing, pissed my wife off. The other day I told her we need to quit her 401k and she went into a hissy fit about her losing out of "free money"

I give up


quasimodo's picture

I do the same thing, pissed my wife off. The other day I told her we need to quit her 401k and she went into a hissy fit about her losing out of "free money"

I give up


Drachma's picture

Nothing wrong with a healthy balance of tossing and hoarding.

Botox4U2's picture

My coin dealer reports kids as young as 9 coming in to buy silver coins. One 9 year old girl comes in his shop every Friday to see him. May I should re-phrase that LOL. To buy silver that is.






Apparently collecting silver is similar to collecting trading cards years ago.


Pants McPants's picture

That's funny, RR - I do the same thing.  My brother bought me a one ounce silver ingot; shaped like a domino.  I call it my totem.

outamyeffinway's picture

I do the same thing. I rely on the principles of Entanglement to get people interested in silver. Once they hold it and actually own it, they seem to naturally want to multiply it. It's quite interesting to observe.

viahj's picture

funny stuff because i do the same thing but with a Maple.  i go around the office flipping that thing over and over.

SilverRhino's picture

I use a buffalo nickel round and a mercury dime replica round here.    

Vagabond's picture

I rock a peace dollar.  I like to show people what real money feels like.

flacon's picture

I do the same thing too! Glad to hear here are more people like me in the world. Today I have a gold eagle in my pocket. 

A Nanny Moose's picture

I tend to lose stuff, so I keep a 1964 Kennedy Half on me. I can demonstrate value with something that is still recognized as legal tender, and not accidentally spend it like I might, with a quarter, or dime.

lunaticfringe's picture

Oh. So people in other countries can buy gold and silver and they take physical delivery, huh? Interesting.

goldenboy's picture

The day of reckoning draws closer.... and closer...