Silver Short Squeeze May Be Brewing as Net Longs Hit Two-Year Low
TREE NEWS reports: After a brutal autumn that saw silver prices plunge below $50/oz, the market may be setting up for a short squeeze. Speculative net longs in silver have collapsed to the 2nd percentile of the past two years, while new shorts have piled in. The midterm election results on November 3 sparked a 6% rebound in silver, and options markets are showing early signs of easing panic. Goldman Sachs commodity strategist Robert Quinn notes that the metal has even withstood a hot CPI print and a 20bp jump in 2-year yields, suggesting forced selling may be largely exhausted.
What Happened
From early October through the US midterms, silver prices fell sharply, briefly dipping below $50/oz—a decline of over 55% from January’s record high of $121.67. CFTC data shows non-commercial traders sold a net $2.3 billion of silver between October 6 and November 3, driven primarily by new shorts ($2.6 billion) rather than long liquidation. Managed money and retail each sold $1.4 billion, while ‘other’ categories (family offices, prop traders) bought $4.7 billion. The result: speculative net longs now stand at just $8 billion, down from $24 billion in January—roughly the level seen when silver traded near $30/oz in early 2025.
After the midterm elections, silver rebounded about 6% (November 3-9), helped by a 7.1% rally in a Goldman Sachs basket of Chinese solar stocks, which are seen as a proxy for industrial demand. Data center stocks, the other demand proxy, fell over the same period. The options market also cooled: the 3-month 25-delta put-call skew dropped from a COVID-era high of ~4.5 to near zero, and implied volatility fell to 38-39% from over 100% in January.
On November 10, a stronger-than-expected CPI report (headline +0.4% m/m, core +0.3%) initially pushed silver down 2.8%, but it rebounded 3% the next morning even as 2-year Treasury yields rose 20bp and the dollar hit a 21-month high. Quinn wrote that silver ‘has now even withstood a strong CPI report,’ a sign that forced selling may be over.
Market Implications
The extreme short positioning creates potential for a squeeze. If prices continue to rise, some of the new shorts may be forced to cover, adding fuel to the rally. However, several risks remain: ETF flows are still selling silver while buying gold and platinum; the Fed’s pricing implies three more rate hikes; and the AI data center theme faces political uncertainty. The dollar’s strength and industrial demand trends—especially in solar and data centers—will be key.
For investors, the setup is asymmetric: with net longs at a two-year low and shorts heavily concentrated, any positive catalyst could trigger a sharp rebound. But confirmation is needed—upcoming CFTC data should show whether managed money is rebuilding longs, and Chinese solar stocks need to hold their gains. Silver’s dual role as a precious and industrial metal means it is sensitive to both Fed policy and green energy demand.
Key Takeaways
- Silver net longs are at the 2nd percentile of the past two years, with new shorts dominating the recent sell-off.
- The midterm elections sparked a 6% rebound, linked to solar stock gains and a weaker dollar.
- Options skew has normalized from COVID-era highs, signaling less fear but not yet optimism.
- Silver withstood a hot CPI print and rising yields, suggesting forced selling may be exhausted.
- Watch CFTC positioning data and Chinese solar stocks for signs of a sustained rebound.
