Comex silver's situation is precarious as the largest short struggles to deliver metal
And that would be the HSBC, ahem, "customer" account
The naked short on the March silver contract is the HSBC “customer” account.
I had posted about this situation a couple of days ago on “X” pointing out that the OI was one of the highest ever at this point in the delivery cycle:
https://x.com/DtDS_WSS/status/1904572463012282757
Over the last 2 days, that HSBC “customer” account has issued delivery notices on 417 contracts (2.1 million oz) dropping the OI as of this morning’s open to 223 (1.1 million oz). Last notice day is tomorrow (March 28) so they have delayed to the last moment.
This isn’t the first time HSBC was caught naked short. On one prior occasion, BofA bailed them out in the waning days of the contract. On this occasion, it appears (for now) they found some metal to deliver. I’ll get to the vault moves in a moment.
I’ve been calling attention to this account for more than a year … since that account commenced huge silver selling in December 2023. Since that time, they have sold about 87 million oz of silver and not bought one single oz. That selling spree accelerated on this current March contract where they have now sold 19.9 million oz … the largest single sell in their history and about double their prior run rate (see the plot below).
I have theorized that this isn’t a customer account, but is an HSBC bank account designed to suppress the price at the worlds price setting venue (comex) as they accumulate metal at non-price setting venues. I tagged this the “Differential Lag Theory” meaning they can buy at remote locations but the price signal lags comex.
I think this doubling of selling during this contract lends credence to that theory … as price pressure has increased, their selling has increased and possibly their buying at remote locations.
In addition, the probability that this account is a silver miner selling their production is diminished as mine production doesn’t typically double.
As time has advanced, it has become obvious this is a planned operation. This account’s huge selling was preceded by a new vault opening at comex (Asahi), a rare occurrence. It is apparent that nearly all the activity at Asahi is associated with this HSBC account as vault moves correlate perfectly with delivery notices issued by HSBC.
And that correlation continues … immediately prior to first notice on the March contract, 7.4 million oz was moved into registered at Asahi. Since then, another 5.9 million oz has been moved into registered with 1.8 million of that occurring on March 25 (yesterday’s report). That 13.4 million oz total remains short of deliveries of 19.9 million oz on this contract (so far). Thus, HSBC has likely burned all their registered inventory and is up against the wall on these last days of the contract.
What does this mean? Comex’s largest silver short is out of metal. This account was 25% of the total short volume on this near record contract … and they don’t have metal to deliver. At some point this charade will unravel.
Thanks Michael. There is clearly something we are missing. Why would anybody be dumping metal on COME? Who could have a reason to do that? Who is the HSBC customer?
Earlier today, silver closed at RMB 8,335/kg in Shanghai. As of right now, silver is trading at RMB 8,032/kg in London. Shanghai is the largest venue in the World for trading physical silver but it is not setting the price. If you were China, would you be happy about that?
What I am about to say is pure speculation, born of the need to try to identify your 'HSBC customer'. Here comes the 'what if'.... what if HSBC is acting as agent for China?
Why would China want to dump metal?
Because it is the quickest way to break the LBMA and COMEX and leave Shanghai as the last man standing. It would make Shanghai the price setting venue.
19.9m ounces (about 600 tonnes) is worth about $600m and China wouldn't even be making a loss because they have lots of physical, they bought years ago at much lower prices. They can easily afford to dump a few thousand tonnes and don't even need to buy it at 'remote locations'... they already have the physical... so they are not even at risk of a short squeeze.
By doing this, the price of silver is suppressed and the other bullion banks carry on shorting (just as they always have). China stands on the other side and buys some of this metal and takes delivery... so they don't even need to use all their own physical, to settle HSBC's short. The buy/sell spread will be pennies and they would know when to buy and when to sell. BUT in the process, they drain metal out of COMEX and COMEX drains metal out of London. Low prices encourage others to take delivery, speeding up the process. Everyone laughs and says "Who is this crazy HSBC account?"
Over a period of two or three years, somebody doing the above would slowly strangle COMEX and the LBMA... draining all available metal... causing them to default... and leaving Shanghai as the global price setting venue. It would all happen slowly and it wouldn't be noticed until the end, when COMEX and LBMA have no metal left.
As I said, this is speculation. It might be somebody else... but who else has a reason to dump metal at low prices?
Michael, Clearly, these accounts that are labeled “customer“ are not true customers as you note. No responsible Bullion bank would allow a customer to go that close to final notice day with an open position that big. It makes perfect sense that it’s a house account being hidden. But there is something else to consider. And it’s actually worse. Bullion banks will frequently open accounts at other Bullion banks to do the same thing you’re talking about so who else would HSBC permit to carry a short position that long that was a “customer“ other than themselves? Someone like JP Morgan.. Or another Bullion bank. This aberration that you’ve uncovered over the last year or so reveals some pretty heinous stuff, possibly racketeering. They’ve done it before Trading with each other in a sort of daisy chain pattern to make sure neither goes out of business.
Cheers and good luck here