A Companion to Sprott’s “We Expect A Short Squeeze In The Silver Market”

Why we concur on a coming squeeze, and how Canadian investors can act intelligently

Executive Summary

Sprott’s September commentary, “We Expect A Short Squeeze In The Silver Market”, outlines a macro regime (tariffs, financial repression, Fed-independence risk) and a micro tape (drained inventories, rehypothecation pressure, and positioning) that together argue for tight physical markets and asymmetric upside in silver. We agree. Below, we highlight the same signals Sprott flags and expand on what they mean for Canadian buyers who prefer physical bullion over paper proxies.

Macro regime: the wind at gold’s back (and silver’s by transmission)

Gold’s technical posture— A textbook consolidation and breakout structure. Flag breakouts after multi-month ranges are typically followed by impulsive legs higher.

Yield-curve linkage

The tight fit between gold and the 2s30s curve reflects the market’s expectation of lower policy rates and higher long-end term-premium/ inflation risk. Silver historically follows gold with beta.

Reserve behavior

Foreign central banks’ gold as a share of reserves now rivals or exceeds U.S. Treasury holdings for the first time since the 1990s. That is not just “optics”—it’s a portfolio shift away from duration and towards neutrality.

Delta Harbour's opinion:

In Canada, the practical transmission of this regime shows up in CAD pricing and in product availability/premiums, not just spot moves. As gold leads, silver’s CAD price can jump faster than expected when USDX slides while CAD weakens—a double-whammy for replacement costs at wholesalers and mints. See our quick CAD-sensitivity chart in the exhibits for how FX amplifies moves.

Microstructure: why silver can squeeze

New, higher trading range— Silver has stair-stepped into a higher channel. Breaks from ranges with rising lows are often the start of trends, not the end.

Inventory drain

LBMA silver holdings have fallen roughly a third since the 2021 peak. Tight physical float = less buffer to absorb speculative flows.

Positioning set-up

CFTC non-commercial longs have been washed out while ETF ounces quietly rebuild (~806 Moz vs ~1,000 Moz prior peak). If speculative longs chase a breakout while ETFs continue to refill, available float can be overwhelmed, forcing shorts to cover into a thin market.

Delta Harbour's opinion:

We see the same strain locally when large orders require mixing denominations or staggered deliveries. When the float tightens, premiums initially widen on retail-friendly sizes (1 oz coins, 10 oz bars), then spread to kilobars and 100 oz as wholesale shelves become thinner. Our “spread by product” is part of our in-house discussion and consultation with new clients, showing typical relative differences so clients can pre-plan their mix.

Policy risk tailwinds: tariffs, financial repression, and “plumbing”

Sprott details the convergence of:

• Tariffs → cost-push inflation and supply chain dislocations (including metals added to U.S. “critical minerals” lists),

• Financial repression → pushing real yields negative via rate cuts, rule changes (eSLR), and potential YCC if the long end refuses to behave,

• Institutional friction → uncertainty around the Fed’s autonomy that undermines the dollar’s store-of-value role.

Delta Harbour's opinion:

For Canadian buyers, that cocktail tends to mean:

1. higher replacement costs at mints/refiners,

2. periodic allocation limits from wholesale desks,

3. stickier premiums even after spot cools,

4. more value in vaulted liquidity (Toronto/Calgary), where metals are already deliverable to counterparties.
   

What to do with this view (without abandoning prudence)

• Structure the position for a squeeze and for exits
  • Core (long-horizon): 100 oz bars/kilobars at lower spreads.
  • Access/retail (divisibility): 1 oz coins & 10 oz bars for piecemeal selling or gifting.
  • Optional satellite: opportunistic adds on dips or when lease-rate spikes signal stress, with possible second storage destination of home and vault or other Canadian location.
• Pre-solve logistics
  • Prefer insured Canadian vaulting with named, auditable serials. Keep our contact info on file so you can execute by phone/email in minutes.
  • If you hold at home, accept that you must prep, ship, insure, and wait, friction that matters during squeezes.
• Manage CAD exposure
  • If your liabilities are in CAD, own the CAD price path. FX can be as important as spot.
• Keep it balanced
  • We’re pro-bullion, not anti-equity. The point is diversification and optionality, not maximalism. Let your facts and liquidity needs set the size.

Do your own research (please)

We concur with Sprott’s framework, but every thesis deserves interrogation. Read the primary sources they cite, watch the slope between the U.S. 2-year Treasury yield and the 30-year Treasury yield, follow lease rates, and track LBMA/COMEX inventory updates. If the chain of evidence weakens, your allocation should adapt. We’ll continue to publish Canada-specific context (premiums, lead times, vault flow).

Summary

Sprott’s call for a silver short squeeze rests on macro fuel + micro scarcity + positioning asymmetry. We see the same movie from our desk, only in Canada, you also have FX and product-mix realities to manage. If you want help tailoring this to your risk, time horizon, and need for liquidity (registered accounts, corporate treasury, home delivery, collateralized financing, family vaulting, etc.), that’s precisely what we do—consultative, physical, Canadian.

Yours to the penny,

Darren V. Long