Just a few hours before Friday’s sell-off, silver was trading above $70 an ounce.
Then Kevin Warsh spoke at Jackson Hole.
Warsh signaled that inflation remains a problem and that the possibility of another interest-rate hike is still on the table. Financial markets reacted quickly. The dollar strengthened, U.S. Treasury yields rose, and precious metals moved sharply lower.
Gold fell as much as 3% during the day, while silver dropped roughly 4%.
Within just a few hours, a substantial part of the previous gains had disappeared.
Yet during those few hours, practically nothing changed in the long-term story for physical gold and silver.
And moves like this are exactly what keep bringing me back, after years of following the silver market, to a much more uncomfortable question:
Who Really Sets the Price of Silver?
Not solar-panel manufacturers. Not miners. Not people buying coins and bars. And most of the time, not buyers who actually want to take delivery of a physical ounce of metal.
The short-term global price is determined primarily in financial markets, where contracts representing enormous quantities of silver can be traded within seconds.
As of August 4, twenty reporting banks on COMEX held 47,592 short futures contracts against only 14,762 longs. Bank short positions represented 42.5% of total open interest.
And according to the latest CFTC data as of August 25, the eight largest traders controlled 47.7% of the gross short side of the market.
But even more important is the history.
Manipulation of precious-metals futures is not an internet theory. U.S. courts, regulators, and the Department of Justice have already established that it has happened.
Silver Manipulation Is Not a Theory. It Has Been Proven
The debate around silver manipulation is often presented as if two groups are standing against each other.
On one side, the “conspiracy-minded silver investors.”
On the other, a supposedly perfectly functioning financial market.
But the actual history is much less comfortable.
In 2020, JPMorgan agreed to pay more than $920 million in connection with unlawful trading in precious-metals and U.S. Treasury markets.
The U.S. Department of Justice described tens of thousands of instances in which traders placed orders they never intended to execute. The purpose was to create a false impression of supply or demand and influence the behavior of other market participants.
That is spoofing.
A trader can, for example, create the appearance of enormous selling pressure by placing large sell orders in the order book. Other algorithms and traders see that apparent “supply” and react to it.
The price moves.
The fake orders are then canceled, while the real trade is executed on the other side of the market at a more favorable price.
Another part of the JPMorgan case is even more interesting.
The Department of Justice said that in some cases the trading was designed to intentionally trigger or defend price barriers connected to options positions held by the bank.
At that point, this is no longer an abstract debate about whether someone might be able to influence the price.
It is documented conduct specifically designed to affect the price.
And JPMorgan was not the only case. The Department of Justice later reported convictions involving former traders from institutions including JPMorgan, Bank of America/Merrill Lynch, Deutsche Bank, Bank of Nova Scotia, and Morgan Stanley.
That is why I find it strange when the very question of precious-metals manipulation is still automatically dismissed.
We are not debating whether manipulation has ever existed. We know it has.
The much more interesting question is how much influence the structure of this market may still have on price today.
The Price Is Not Set at the Mine. It Is Set in the Futures Market
This is where the core of the problem lies.
When an industrial company needs physical silver, someone has to mine it, process it, refine it, transport it, and deliver it.
All of that takes time and money.
A futures contract works completely differently.
One standard COMEX silver futures contract represents 5,000 troy ounces of silver. As of August 25, the CFTC reported open interest of 113,801 contracts.
Enormous price exposure can therefore be created electronically without a single physical silver bar moving at that moment.
That futures price then becomes the benchmark for practically the entire market.
A dealer selling physical silver uses the spot price.
A refinery watches it.
An investor watches it.
A miner watches it.
The media watch it.
Yet that price signal can originate in a market that is fundamentally financial in nature.
This is where one of the biggest weaknesses in the current price-discovery system lies.
Financial supply of silver can be created almost instantly. Physical supply cannot.
When a large volume of sell contracts hits the futures market within a short period of time, the price can react immediately. But a mine cannot produce even one additional ounce during that same hour.
Physical supply and paper supply therefore do not operate in the same way.
Yet it is the paper market that determines the price used for physical metal.
To me, this asymmetry is one of the most important parts of the entire story.
The structure of the market itself gives large participants with sufficient capital an extraordinary ability to influence the short-term supply and demand reflected in price.
Banks and a Handful of the Largest Traders Control a Huge Share of the Short Side
And this brings us to the current CFTC data.
In my view, these numbers are difficult to ignore.
| Metric | Current Value | Date |
|---|---|---|
| COMEX Silver Open Interest | 113,801 contracts | Aug. 25, 2026 |
| Swap Dealers Long | 22,636 | Aug. 25, 2026 |
| Swap Dealers Short | 50,536 | Aug. 25, 2026 |
| Swap Dealers Net | −27,900 | Aug. 25, 2026 |
| 4 Largest Traders – Share of Gross Short | 31.6% | Aug. 25, 2026 |
| 8 Largest Traders – Share of Gross Short | 47.7% | Aug. 25, 2026 |
| Banks – Long Futures | 14,762 | Aug. 4, 2026 |
| Banks – Short Futures | 47,592 | Aug. 4, 2026 |
| Bank Shorts as Share of Open Interest | 42.5% | Aug. 4, 2026 |
Source: CFTC.
Two different sets of statistics point toward a very similar picture.
Swap dealers hold more than twice as many short contracts as long contracts.
Banks as a group hold more than three times as many short futures as long futures.
And just eight of the largest traders account for almost half of the entire gross short side of COMEX silver futures.
I consider this concentration far more important than the absolute number of short contracts.
If short positions were evenly distributed among hundreds or thousands of independent participants, the situation would look very different.
But that is not what we see.
The four largest traders alone hold 31.6% of gross short positions. The eight largest hold 47.7%.
That means a relatively small number of participants carry extraordinary weight on one side of the market from which the world takes its benchmark silver price.
It is completely legitimate to ask how this level of concentration affects price discovery.
Especially in a metal where we already have historically documented cases of manipulation taking place specifically in the futures market.
Why the Price Can Be Pushed Down Faster Than the Physical Market Can Change
Friday’s trading was a useful reminder of just how quickly this entire mechanism can operate.
Only a few hours before the sell-off, silver was above $70.
Then Kevin Warsh gave his speech at Jackson Hole.
Warsh warned that inflation remained a problem and that another rate increase was still possible. The dollar began strengthening, Treasury yields moved higher, and precious metals fell sharply.
Gold dropped almost 3%, while silver fell around 4%.
That was the immediate trigger for Friday’s move.
But what changed in the physical market during those few hours?
Practically nothing that would justify such a rapid change in price.
Global mines did not suddenly begin producing 4% more silver within a few hours.
Industrial demand did not fall 4% during the afternoon.
The six-year deficit did not disappear.
Inventories were not suddenly replenished with tens of millions of new ounces.
The long-term story for physical gold and silver remained the same. What changed were the expectations of the financial market.
And that is exactly why I believe it can be misleading to explain large silver price moves purely through the traditional view of physical supply and demand.
Silver actually has two forms of supply.
One is physical.
It comes from mines, recycling, and existing above-ground inventories.
The other is financial.
It comes through futures, options, swaps, and other derivative positions.
In the short term, the second can matter far more for the price than the first.
Friday’s sell-off demonstrated this very clearly. One speech changed expectations around interest rates, financial capital reacted immediately, and the global silver price fell several percent within hours.
The physical balance of the metal itself remained practically unchanged.
Large sell orders also do not have to move the price only through their direct impact. They can trigger stop-losses, algorithmic selling, and the liquidation of other leveraged positions.
The original move can therefore begin reinforcing itself.
Then there are margin requirements. If sharp volatility leads to higher collateral requirements, some leveraged investors must either provide additional capital or close their positions. Further selling can follow without any change whatsoever in the physical supply of silver.
That is why, during sharp silver sell-offs, I look beyond the macroeconomic trigger and also watch when the move began, futures volume, what happened to open interest, and which groups changed their positions.
The Physical Market Is Starting to Push Back Against the Paper Market
This is where 2026 becomes particularly interesting.
The paper market can create enormous quantities of contracts.
But it cannot manufacture physical silver.
And after several years of deficits, the physical market is much tighter than it used to be.
The Silver Institute expects 2026 to be the sixth consecutive year of market deficit. The latest World Silver Survey estimates this year’s deficit at roughly 46.3 million ounces, with the cumulative deficit over the full six-year period reaching approximately 762 million ounces.
The Silver Institute also described an exceptional liquidity squeeze in the London physical market during its assessment of 2025, which led to a sharp rise in lease rates.
If the physical market were perfectly supplied and metal were available practically without restriction, why did we see this level of stress in the financing and lending of physical silver?
A similar signal is now coming from Asia.
In India, restricted imports contributed to a shortage of available silver, with local premiums reaching roughly $6.50 per ounce above the global price in July.
China shows another divergence.
As of August 28, the Shanghai Gold Exchange Ag(T+D) benchmark was trading at approximately $77.35 per ounce after conversion, while the Western benchmark price was significantly lower. The difference exceeded 12%.
The same physical metal is still trading at significantly different prices in different parts of the world.
This is where paper control of the price begins to face a problem.
If physical metal is abundant, arbitrage should naturally compress large price differences.
But if metal is not easily available, that arbitrage cannot continue indefinitely.
A paper contract can be created with a click.
Thousands of physical tonnes of silver cannot.
Where I Think the System Could Reach Its Limit
I do not believe silver manipulation will end because one day a regulator suddenly announces that the market will be perfectly fair from tomorrow onward.
History gives me little reason to be that optimistic.
If the current system ever changes fundamentally, I believe it will come from an entirely different direction.
From the physical market.
As long as enough real metal can be delivered to those who demand it, the futures market can continue functioning as the primary center of price discovery.
The problem begins when the paper price stops matching the price at which physical silver is actually available.
We are already seeing some early signs.
Six years of cumulative deficits.
Stress in London.
High regional premiums.
Significantly higher prices in parts of Asia.
And against all of that, a futures market where twenty banks hold 42.5% of open interest in gross short positions, while the eight largest traders represent almost 48% of the short side.
This is the combination I will continue watching.
- concentration of short positions among the largest traders,
- the Bank Participation Report and changes in bank short positions,
- open interest during sharp price movements,
- COMEX registered inventories and physical deliveries,
- London lease rates,
- prices and premiums in China and India,
- and the continuation of the structural deficit.
If the silver price declines while physical premiums, lease rates, or regional price differences begin rising at the same time, that would be one of the strongest signals to me that the paper price and physical reality are once again diverging.
And the longer that divergence persists, the more interesting the situation becomes.
Spoofing can be done.
Futures contracts can be created.
Enormous short positions can be held.
The price can be pushed in one direction or the other in the short term.
But there is one thing the financial market cannot create: a physical ounce of silver.
And that is why I believe the real limit to any long-term manipulation of the price will not be a regulator, a court, or another fine imposed on a major bank.
It will be the moment when enough buyers stop wanting paper exposure and begin demanding actual metal.
At that point, what matters will no longer be how many short contracts can be created. What will matter is how much silver can actually be delivered.
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