I’ve read a lot recently on the potential for the Comex to call Force Majeure in the coming weeks or months as inventories of metals deplete under thunderous demand.
To be clear on definition, as it stands today there is no possible way the Comex could claim Force Majeure. Absent an Act of God such as a weather event that wipes out the warehouses or a war that would prevent access to trading, what is going to happen in the Comex isn’t unforeseeable and therefore it cannot be claimed as Force Majeure under standard contract law.
The actual scenario is thus: The Comex, via mismanagement and rehypothecation of its metals inventory will be unable to fulfil its obligation to deliver. I.e. the customers are paying for the metal that just isn’t there. This position is known as a Default and is a different scenario to a Force Majeure. Notwithstanding definitions, all this is irrelevant as tectonic plates will shift to prevent it from happening and here is why.
The inventories left in the Comex don’t make for good reading. There are just over 100 million oz of Registered with 400 + million oz as Eligible being held by banks and ETFs. This (despite the confusing code of Eligible) cannot be used to settle Futures Contracts (unless duplicitously transferred to the Registered category under the cover of darkness)
Currently March Futures contract – historically the biggest Silver delivery month of the year – has open interest of over 400m Silver oz. That’s four times the demand for Registered Silver that Comex holds. This is also assuming that the Comex is actually telling the truth on its stockpiles.
Throughout the years, its not been uncommon for 99% of Futures contracts to cash settle, not caring about physical delivery as the Comex essentially operates as a derivatives market that was never set up for anything other than fractional reserve paper transactions.
To give you an idea of how the physical demand has changed, in January which is typically a quiet month, 49.4m oz of Silver were removed from the Comex. That is over four times higher than January 2025. This ate into 26% of the Comex inventory. In the first five days of February, nearly 19m oz of Silver have been requested. Holders of later contracts have been rolling them back into February such is the concern for availability of the metal.
All it would take is for 20% of March contracts to stand for delivery and the Comex is drained. Given what we have witnessed in January and now in the first week of February, 20% would seem on the extremely low side and probability points far higher. This obviously doesn’t account for the demand in the remaining nine months of the year. Good luck getting that.
It’s of no surprise to anyone that paper manipulation is still rife in the metals markets. Was the coordinated take down the last chance for naked shorts to cover their positions? We know TD Securities fell foul of a stop loss betting against the market trend and momentum, and we also know JPMorgan closed out its short position on the day of the Silver collapse in the mid $70/oz level.
Putting to one side how the CFTC can allow two years’ worth of mining supply to be dumped on the market yet inventories don’t increase commensurately, for those that don’t understand selling, you don’t dump it all at once. The release would be slow to garner the best price as you don’t want the market moving lower too fast and having to settle at lower prices. Unless of course you are crashing a paper market deliberately to buy back physical at lower prices.
Also worth noting is a significantly lower Silver price is hardly an incentive for any institution in the Eligible category to sell their silver into the market when they know full well prices will be heading higher. Was China behind the takedown in a strategic play to nail the price only to empty the western vaults of metal? What other reason could there be for such counter intuitive price action?
The answer lies in how these markets work and sad to say the house will never lose. Despite all the games going on, the Comex will simply not be allowed to default. We’ve seen in recent months margin hikes for all four precious metals leading to temporary down days. We also know that Silver Rule 7 was introduced in the 1980’s run where the exchanges simply refused all bids and became a sales market only. Make no mistake, they will introduce every possible trick to make Silver unattractive to pursue ensuring the casino wins. That said their illicit winnings may well be considerably trimmed back in the future.
So all this paints an extremely peculiar picture of Silver’s price action. A 40% + drop in price in the last two weeks into a market buckling under extreme demand that can’t deliver doesn’t exactly add up. And this is where it gets interesting.
February 27th 2026 is First Notice for March Futures delivery and we will begin to see the appetite for physical ownership. In the face of an odds on default, I fully expect the Comex to cash settle March Futures contracts for those standing for delivery as it has no other choice and when you read the fine print, it is perfectly within its rights to do so no matter how nefarious we all know this is.
Given everything outlined above, I expect the world to react to this with a total loss of trust in the derivatives markets. This could send ripples across every financial sector and eventually could force a new way of commodities pricing via a structure of physical only trading that doesn’t involve the opportunity for price suppression.
Would this scenario see the Comex and LBMA continue? Sure, but who is going to trade those markets that wants the physical metal knowing it isn’t there with a risk of settling in cash? Liquidity will dry up completely and this will end up moving away from the price setting mechanism. It was a run on the yellow metal that caused The London Pool to collapse in the 1960’s so this shouldn’t be ruled out.
So where will the Silver come from, who owns all these claims and what then happens to the price of Silver? We know of institutions that are going direct to the miners, and perhaps this becomes the norm. One could cognitively argue after this exposure that the Comex was never needed and was designed to manage the price via derivatives. It would only be the greed of the bankers who have trousered billions from it that would disagree.
So the big question – what happens to the price of Silver when the Comex can’t deliver? Logic would dictate that demand far, far outweighing supply would send the price to the moon. However when has the Silver market ever worked on logic? I fully expect a much higher Silver price later in the year, albeit the next two months could be tremendously volatile. You will have bankers trying desperately to work out how they continue their rigged game, and institutions demanding the metal looking at other ways to get it.
Ultimately this will create an even bigger divergence in the derivatives and physical price setting. Right now you can scour the globe and you cannot buy Silver at any level even close to spot price. Eventually this was always going to happen at some point.
In the new reality phase described above, who would set the price of metals once the world has lost faith in the west? The answer is China – no nation is positioned better on the planet to profit from a paradigm shift in metals than the Chinese. We know their Gold stack is many multiples higher than they claim it to be. President Xi last week stated that China are advocating to use the Yuan as the new world reserve currency, something I predicted in This Article in 2021. The shift in power from West to East has been coming and it will be backed against hard monetary assets. They have the physical Gold inventory to back their currency.
The precious metals, and particularly Gold and Silver I believe are now months away from a total reset. Trump and his team have intimated that a price floor is required in strategic minerals. This could be the pretext for a new monetary system which is a “when” not “if”. Levels of debt and the financial irresponsibility associated with governments and central bank QE has fuelled fiat currency debasement for decades. You can print any currency ad infinitum, but you cannot print Gold and Silver – the benchmark of sound money for over 5,000 years.
The fiat currency system as we know it is on the brink of total collapse. There is so much interdependency in all markets now that the contagion effect of one has enormous corollaries to another. All the signs are there but they are being ignored by the stock markets as nothing has broken yet. Right now it is closer than ever and the fuse is well and truly lit as we head towards March Futures First Notice.
Warren Buffet famously said: “Only when the tide goes out do you see who has been swimming naked” We could be a matter of months away from a worldwide disclosure.
