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Recently, there's been something that people are treating as a joke, but it's actually quite suspicious. Trump said that due to progress in negotiations with Iran, the planned military strike was delayed for five days. But Iran immediately contradicted him, saying no such talks had taken place. What’s going on with this clumsy fabrication? Why five days? It seems like he's delaying for some specific reason.
Trump mentioned that the five-day delay brings us to March 27th, which is the last delivery deadline for the March silver futures contract at the New York Mercantile Exchange (NYMEX). The reason he could create this fake story is that if Trump didn’t take those five days to cover the financial big players’ retreat, a massive financial squeeze might have occurred. To explain the whole situation, and how ordinary people should respond, we need to start with the extreme leverage game that has been played in the silver market for years.
According to the most basic principle of trading, "pay one hand, deliver one hand," when you trade a 1 ounce silver futures contract at an exchange, there should be exactly 1 ounce of physical silver in the exchange's vault as collateral. This ensures everyone’s security. Right? But Wall Street market makers found this too slow to make money. To manipulate pricing power and make a ton of trading fees, they came up with a shameless fractional reserve system. What does this mean? They massively oversupply paper silver contracts on the market, allowing large institutions to sell hundreds or even thousands of tons of silver without any physical silver backing it up. But how could this be possible, with the paper contracts far exceeding the actual silver in the vault? How has this trick lasted for decades without blowing up? Because Wall Street figured out the psychology of retail investors and speculators. Most people buying silver futures don’t really intend to hire a truck to carry tons of silver bars home, right? It’s just about buying low, selling high, and making a quick profit. As long as no one demands to take delivery of physical silver, and as long as they close their positions before delivery day, the market can keep on churning with a small pile of real silver circulating in many hands.
However, the situation has changed now. With wars raging and inflation soaring, the dollar’s purchasing power is shrinking rapidly. Those holding long contracts suddenly woke up they don’t want dollars that might turn into worthless paper; they want real silver to protect themselves. So, on the delivery date of the main contract, these long holders refused cash settlement. They went to the exchange and said, "I don’t want to just make a profit on the price difference, I don’t accept dollars, I need to take physical delivery today."
In the financial world, there’s a terrifying term for this: a "run" or "bank run."
Take a look at the real data, and you’ll see how terrifying the situation is. Currently, the open interest for COMEX silver futures is over 110,000 contracts, translating to an astonishing 573 million ounces of silver exposure. But how much actual silver is in COMEX’s vault? Only about 103 million ounces. The physical coverage rate is under 24%, so for every four people demanding physical delivery, only one will get a silver bar, and the rest will only receive a paper IOU from Wall Street.
Over the past few years, large institutions have already seen through Wall Street’s tricks. They’ve been moving millions of ounces of real silver out of COMEX’s vaults every month, and the vaults are now nearly empty. So, if the longs insist on taking delivery on the evening of the 27th, and Wall Street can’t deliver, the whole financial system’s credibility would collapse in an instant. Normally, if there’s no silver in the vault, should Wall Street quickly go to the market to buy physical silver to fill the gap? But Wall Street doesn’t do that. Their logic is, if they can’t deliver, they’ll just crush all the people wanting delivery before the settlement date. As long as no one comes to demand the metal, they won’t need to deliver. So, they raise margin requirements to the sky, which is the bloody truth behind the recent cliff-like drops in gold and silver prices.
Many retail investors and speculators, although they saw the direction right, didn’t have enough cash to meet the suddenly doubled margin calls. To avoid being forced out, they had no choice but to sell their long positions at a loss, triggering a chain reaction. The more they sold, the more the price dropped, and the more people were forced to liquidate their positions. Wall Street used this extreme margin manipulation tactic to create a liquidity squeeze and systematically wipe out those longs who couldn’t provide physical silver for margin calls. Do you think the drop in gold and silver prices was because they weren’t valuable? Absolutely not. It was because the retail longs were forced out and the bloody chips were thrown onto the market.
Now, Wall Street’s shorts are calmly picking up those bloody chips at the low prices and closing their shorts. And that’s the real reason behind the so called "five day peace period." Trump’s fake news was meant to lull retail investors into lowering their guard, so they could trap them all in one go.