Understanding the Futures Market for Metals – And Why You Can’t “Squeeze” Silver Like a Stock

Why There’s a Futures Market for Metals

Metals like silver, copper, zinc, and gold are physical commodities. They have to be mined, processed, and delivered. The futures market allows producers (like mining companies) and consumers (like manufacturers) to lock in prices ahead of time. This helps manage risk in a highly volatile market. For example, a copper miner might want to lock in a sale price months before the metal is even extracted, to stabilize revenue and help with budgeting and planning.

In silver’s case, this is even more important because about 70% of silver production comes as a byproduct of mining other metals like copper, gold, and zinc. These diversified mining companies don’t depend on silver as their core product. They’re happy to pre-sell it (often months or years in advance) through futures contracts, effectively locking in a revenue stream.

How This Differs From Stock Shorting

When someone shorts a stock, they’re essentially borrowing shares to sell now, betting they can buy them back later at a lower price. This creates vulnerability, if the stock price goes up, the short seller could face margin calls, forcing them to buy back at higher prices, and possibly triggering a chain reaction of buying that causes the price to spike even more.

This is what happened with GameStop. The shorts were naked, meaning, they didn’t own the stock, and couldn’t cover if the price moved against them.

In contrast, the silver “shorts” aren’t the same thing. In the metals market, most of the short positions are hedges, not bets. They’re part of a balanced position where, say, a bullion bank agrees to buy physical silver from a miner and simultaneously enters a short position on paper to neutralize the price risk.

These banks or “commercials” don’t speculate on price. They earn a fee for facilitating transactions between producers and buyers. And because they’re backed by physical silver or long-term contracts, they’re not at risk of a squeeze in the same way stock short sellers are.

If silver prices spike, commercials simply unwind and reset their hedge at the new price. There’s no margin panic, no forced buying, no catastrophic losses. In fact, they may benefit from the price move, since they hold physical metal.

What This Means for Future Demand Growth

Here’s where things get interesting. Because so much silver is sold in advance, essentially presold before it’s mined, the futures market can actually hide signs of rising demand in the short term. If new tech (like solar, EVs, or AI servers) suddenly drives up silver usage, supply might not be able to respond quickly, especially if the ore is coming as a byproduct from mines focused on other metals.

That creates a potential for tightness in the physical market, even if the futures market looks stable. Over time, this could push prices higher, not from a squeeze, but from real-world imbalances between growing demand and locked-in, inflexible supply.

Bottom Line

The futures market for metals is a risk management tool, not a casino. It works very differently from stock markets, and it’s designed to be resilient against speculative attacks. Silver, in particular, is deeply embedded in a complex web of hedges, pre-sales, and industrial demand, and that makes the idea of “squeezing” silver shorts both impractical and misunderstood.

But that doesn’t mean silver can’t go higher.

If demand outpaces expectations and production can’t pivot quickly, the price of physical metal will reflect that reality.