TD Securities takes a second hit on silver short, losing $606k
Commodity analysts at TD Securities have once again underestimated momentum in the silver market, as the Canadian bank has been stopped out of its short silver trade for a second time since October.
In a note on Wednesday, one week after initiating its silver short trade, commodity analysts at TDS said they exited the position with a $606,000 loss. The bank said its stop-loss was triggered at $93.15 an ounce as March silver futures surged to a fresh record high of $93.70 an ounce overnight.
TDS entered its short position at $78 an ounce, and within one week, silver prices surged more than 19%. While the precious metal has fallen from its overnight record highs, prices are still up more than 21% in the early days of the new year.
In the initial trade note last week, Daniel Ghali, senior commodity strategist at TDS, said the bank was looking for downside momentum in silver prices to pick up, as annual index rebalancing was expected to push $5 billion out of the marketplace.
TDS also expected some rebalancing in the physical market to boost liquidity, easing the pressures that triggered the unprecedented market squeeze to record highs.
However, in his latest note, Ghali said index rebalancing has been well absorbed by the marketplace.
“The BCOM rebalance was significant in scale for silver, and although flat prices did not trade lower, price action in timespreads and open interest data suggest the offsetting flow was more likely associated with fresh longs over the last week, offsetting roughly $7bn worth of outflows — above $75/oz,” Ghali said. “These are now vulnerable, but without forced selling, a psychological shift may be required for these to commence, likely owing to a technical breakdown.”
Although TDS took its second loss in silver, Ghali said the market still looks significantly overbought.
“Silver markets have progressed beyond rational momentum over the last months, but an inflection point could be on the horizon,” he said.
One potential catalyst in the silver market could be President Donald Trump’s decision not to impose tariffs on the precious metal, which was designated a critical metal last year.
The market has been eagerly awaiting the administration’s Section 232 tariff decision, as the threat of an import tax on silver has added to the market’s liquidity and supply-chain issues.
“We have high conviction that physical availability concerns will significantly deteriorate, following (1) the largest wave of repletion on record, (2) a shrinking primary deficit, resulting in a hastening of silver's inventory cover, and (3) a de-fragmentation of inventory systems which now effectively places the 430mn oz of metal sitting in Comex warehouses at London's disposal, supplementing London's largest wave of repletion on record,” Ghali said.
