The silver market is at risk, with 400 paper claims per ounce.

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The silver market on the COMEX is teetering on an unsustainable foundation. For every ounce of physical silver available, there are 400 paper claims in circulation. This means the market operates with 400 times more promises than actual metal, a system that looks increasingly like a scam rather than a fair market.

This discrepancy arises from the fractional reserve system, where only a fraction of traded silver exists physically. While this allows for high trading volumes and liquidity, it creates immense systemic risk. The market relies entirely on confidence in these paper claims. If that confidence erodes, the fallout could be catastrophic.

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Critics warn that such a lopsided system enables market manipulation. Entities can influence silver prices without ever holding or delivering the physical metal. The result? Artificially suppressed prices that prevent silver from reaching its true value. This echoes patterns seen in the 2008 financial crisis, where over-leveraging on paper assets brought the system crashing down.

When the COMEX house of cards falls, silver prices could explode. If investors rush to redeem physical silver and discover it isn’t there, demand would surge uncontrollably. The paper system, built on trust, would unravel, and the metal’s price could finally reflect its actual scarcity and value.

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Regulators may be forced to step in if chaos ensues. Transparent systems and stricter controls could become necessary to stabilize the market and protect investors from further manipulation. Yet until then, the risks remain dangerously high.

One analyst sums it up bluntly: “The current system is like a house of cards; it’s only as strong as the confidence in it.” Investors should watch closely—when this market breaks, it won’t do so quietly.

Sources:

https://www.kitco.com/commentaries/2024/11/28/The-real-silver-supply-is-even-tighter-than-you-think.html

https://www.zerohedge.com/commodities/comex-silver-has-400-paper-ounces-every-physical-ounce

https://www.gold-eagle.com/article/comex-silver-futures-have-400-paper-ounces-physical-ounce