Global geopolitics

An analysis of events surrounding the silver market dislocation of Friday 13 February, and the systemic mechanics that enabled it

It’s Saturday morning, February 14, 2026, with global markets closed, the week’s turbulence in silver has come to a temporary halt. Over the preceding five trading days, February 9 through February 13, the market had been subjected to an unusually intense sequence of pressures, of coordinated media narratives forecasting extreme price moves, heavy issuance of paper contracts aimed at driving prices lower, selective disclosures regarding vault inventories, and a late-night alteration of margin requirements that included a 70 percent hike and restrictions on delivery. Forced liquidations followed before dawn. By the close on Friday, silver settled at $78.04 per ounce, up 3.83 percent on the day and 141 percent higher than a year earlier.

The episode merits attention not for its rhetoric but for what it reveals about the contemporary structure of commodity markets. Within a single week, pricing in a globally traded asset was shaped not only by supply and demand, but by leverage, rule changes, information flows, and the discretionary power of exchanges to recalibrate risk parameters in real time. The sequence illustrates how market outcomes can hinge as much on institutional interventions, margin policy, delivery rules, and liquidity management, as on underlying fundamentals. In this respect, the volatility in silver was less an anomaly than a case study in how financial architecture, under stress, redistributes power among participants and tests the resilience of price formation itself.

So, yes, Friday 13 February marked a decisive rupture in the global silver market, exposing the structural separation between paper pricing mechanisms and physical metal availability. Price formation failed under visible stress, not through organic selling pressure, but through administrative and narrative interventions designed to protect a leveraged settlement system approaching physical default. Ted Butler, one of the longest-serving analysts of silver market structure, has repeatedly described this system as “a paper market many multiples larger than the underlying physical supply, sustained only by confidence in cash settlement” (Butler, Butler Research, latest update January 2026). The episode was not an isolated market fluctuation, nor a speculative excess unwinding naturally; we witnessed in real time,  a coordinated suppression event executed under conditions of extreme inventory scarcity and contractual imbalance.

The silver futures market entered February with registered inventories on the COMEX falling below one hundred million ounces, while open interest for the March delivery month exceeded three hundred million ounces. The CME Group’s own warehouse reports confirmed registered stocks near ninety-eight million ounces, while futures positioning implied claims exceeding three times that amount. This ratio represented a leverage multiple historically associated with forced cash settlement episodes, rather than orderly physical delivery. As former CFTC commissioner Bart Chilton previously observed, “When paper obligations overwhelm deliverable supply, the market ceases to be a price discovery mechanism and becomes a control mechanism” (Chilton, public remarks, September 2013). Withdrawals from registered vaults accelerated daily, despite declining paper prices, demonstrating persistent physical demand unresponsive to futures market signals. Price decline coincided with inventory depletion rather than liquidation, contradicting standard commodity pricing logic described in classical futures market theory.

An emergency increase in COMEX maintenance margins occurred overnight, raising required collateral per silver futures contract by approximately sixty-eight percent. CME notices confirmed the increase from roughly fourteen thousand dollars to over twenty-three thousand dollars per contract, implemented without advance consultation. This decision followed two prior margin increases within three weeks, executed without corresponding changes in volatility metrics or supply fundamentals. The timing, immediately preceding first notice day for March delivery, ensured forced liquidation among non-commercial long holders unable to meet sudden capital demands. Historian of financial crises Niall Ferguson has noted that abrupt rule changes during settlement windows “transfer risk asymmetrically from institutions to marginal participants” (The Ascent of Money, 2008). Price collapsed during thin overnight trading sessions, where liquidity was insufficient to absorb algorithmic selling pressure.

Simultaneously, Rule 594B restrictions were invoked to limit non-commercial participation in physical delivery, effectively excluding a large portion of longs from standing for metal. These actions altered settlement conditions mid-cycle, violating expectations of contractual neutrality that underpin futures market credibility. Legal scholar Lynn Stout previously warned that markets relying on discretionary rule enforcement “retain the outward form of markets while abandoning their substance” (Stout, The Shareholder Value Myth, 2012 ). Such measures did not resolve supply imbalance, but delayed confrontation by expelling weaker counterparties.

During the same period, trading volume failed to confirm the magnitude of price movement. Open interest declined modestly relative to the scale of the price drop, indicating that few contracts were genuinely sold. Exchange-traded fund flow data showed minimal net liquidation, while intraday transaction analysis revealed extensive wash trading patterns. The Gold Anti-Trust Action Committee has documented similar episodes for decades, noting that “large price declines frequently occur in the absence of proportionate selling, a signature inconsistent with legitimate market behaviour” (GATA, market studies, 1999-2025). Price suppression occurred absent meaningful transfer of ownership, pointing to spoofing and layered order strategies rather than directional conviction.

A parallel development unfolded in Asia. The Shanghai Futures Exchange suspended additional clusters of trading accounts for violations, bringing total suspensions to twenty-two within days, according to Shanghai Futures Exchange disciplinary enforcement bulletins (February 2026). These measures followed abnormal overnight price action in silver futures coinciding with United States trading hours. Removal of these participants eliminated sell-side liquidity ahead of the Lunar New Year holiday, reducing arbitrage pathways between Asian physical markets and Western paper markets. Shanghai premiums remained elevated, with local bullion dealers reporting persistent premiums exceeding ten percent, reinforcing the divergence between physical demand and futures pricing.

Narrative intervention accompanied mechanical suppression. A false headline attributed to Bloomberg claimed Russian movement back toward dollar settlement structures, triggering automated selling across precious metals. Market microstructure researchers have shown that algorithmic systems react disproportionately to headline keywords regardless of subsequent clarification (Menkveld, Journal of Finance, October 2013). Subsequent clarification failed to reverse the initial price damage, illustrating the asymmetric impact of information shocks in algorithm-dominated markets. Such episodes reflect documented use of headline distribution to provoke short-term price reactions, particularly where leveraged positioning magnifies effect.

Near-zero delivery notices issued despite substantial open interest approaching settlement deadlines. CME delivery reports confirmed the anomaly. This pattern suggested strategic delays by bullion banks managing naked short exposure, rather than routine clearing. As economist Michael Hudson has argued, “When delivery is avoided systematically, futures markets function as price-setting tools rather than delivery mechanisms” (Killing the Host, 2015). Aggressive further price suppression would have accelerated physical withdrawals, increasing delivery risk. Instead, price was forced down sharply once, then allowed to stabilise as inventory drawdowns continued.

The situation resembled historical squeeze dynamics, notably the Volkswagen episode of 2008, where derivative exposure exceeded available float. In silver, even modest percentages of longs standing for delivery would overwhelm registered inventories. Mathematical inevitability replaced speculative uncertainty. With minimal rollovers observed and a significant portion of open interest remaining in the front-month contract, short-covering pressure mounted quietly beneath falling prices.

Exchange-traded silver funds provided further evidence of price distortion. Deviations between fund share prices and net asset value widened during United States trading hours, a condition that analysts note can only occur when underlying spot prices diverge from physical clearing benchmarks. Former LBMA consultant Alasdair Macleod has written that “ETF discounts during falling prices often mask physical tightness rather than surplus” (Macleod, independent bullion market commentary, 2019–2025; latest January 2026). Physical metal temporarily exited fund custody during settlement windows, then returned as contractual obligations cleared. Throughout this process, aggregate physical availability declined, contradicting the apparent surplus implied by futures prices.

These mechanisms served a singular purpose: preserving the integrity of a dollar-denominated settlement system unable to accommodate sustained physical delivery. Silver functions not merely as an industrial commodity, but as a monetary barometer reflecting confidence in fiat structures. Economist James Rickards has described precious metals suppression as “a policy tool used to delay recognition of currency debasement” (The New Case for Gold, 2026). Suppressing its price delays signals of inflationary transmission, particularly under conditions of expanding sovereign debt and declining real yields.

The episode carried broader implications. Sustained divergence between paper and physical markets erodes trust in benchmark pricing. Producers, consumers, and sovereign holders increasingly bypass futures exchanges in favour of bilateral contracts and alternative settlement venues. United Nations Conference on Trade and Development (UNCTAD Trade and Development Report, 2019–2025; latest September 2025) reports have documented a gradual shift toward regional commodity pricing frameworks where physical delivery remains central.

Dollar vulnerability underpins these dynamics. Persistent trade deficits, rising energy costs, and accelerating de-dollarisation initiatives pressure reserve currency status. Precious metals price control serves as a defensive mechanism, masking inflationary transmission and discouraging capital flight. When control falters, revaluation occurs abruptly rather than gradually, as observed historically during previous reserve currency transitions.

Friday 13 February did not resolve these pressures. It deferred them through administrative force. Each intervention reduced available liquidity, tightened physical supply, and concentrated risk among fewer participants. The system survived the week, but at the cost of transparency and confidence. Price discovery failed openly, revealing a market managed for stability optics rather than equilibrium.

What occurred was not theft in a legal sense, but expropriation through structure. Retail participants bore losses induced by rule changes and forced liquidation, while systemic short exposure was reduced without physical settlement. Value transferred invisibly from those relying on market signals to those controlling settlement conditions. Such outcomes redefine fairness within modern financial markets.

The silver market now approaches a point where further suppression risks disorderly repricing. Physical demand persists independent of futures price, inventories decline despite intervention, and alternative markets restrict manipulative participation. The events of that Friday should be understood not as anomaly, but as warning.

Authored By: Global GeoPolitics

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References:

Butler, Ted. Butler Research. Ongoing analytical reports on COMEX silver positioning, paper leverage, and physical delivery stress, published continuously 2004–2024, latest reports January 2026.

Chilton, Bart. Public remarks on precious metals markets delivered as Commissioner, U.S. Commodity Futures Trading Commission, including speeches and interviews, September 2013.

Ferguson, Niall. The Ascent of Money: A Financial History of the World. New York: Penguin Press, 2008.

Gold Anti-Trust Action Committee (GATA). Documentation on Precious Metals Market Intervention. Market studies, regulatory submissions, and statistical analysis, 1999–2025, latest updates December 2025.

Hudson, Michael. Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy. Dresden: ISLET Verlag, 2015.

Macleod, Alasdair. Independent bullion market research and ETF settlement analysis published through GoldMoney Insights and private research notes, 2019–2025, latest commentary January 2026.

Menkveld, Albert J. “High Frequency Trading and the New Market Makers.” Journal of Finance, Vol. 68, No. 5, October 2013, pp. 1955–1999.

Rickards, James. The New Case for Gold. New York: Portfolio/Penguin, 2016.

Shanghai Futures Exchange (SHFE). Disciplinary enforcement notices and account suspension bulletins relating to futures market violations, February 2026.

Stout, Lynn A. The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public. San Francisco: Berrett-Koehler Publishers, 2012.

United Nations Conference on Trade and Development (UNCTAD). Commodity Market Developments and Trade and Development Reports. Geneva: United Nations, annual editions 2019–2025, latest edition September 2025.