After a near 150% surge in the global silver market last year, prices have recently shown signs of weakness, failing to hold above the $80 per ounce mark. At this critical juncture, TD Securities, a top Canadian investment bank, has once again made a high-profile move, openly betting on a silver price crash. The firm's latest trading strategy indicates that it has established short positions in silver futures and asserts that silver will face a sharp decline within the next three months, with a target price of $40 per ounce. This move not only represents a strong bearish view on the current high levels but also sends a clear signal to the market: the nearly year-long silver frenzy may be nearing a turning point.

Core strategy: Precise planning and rigorous risk control

TD Securities' operation was meticulously planned, demonstrating institutional-level rigorous risk control. Specifically, its senior commodities strategist, Daniel Galli, disclosed in his latest report that he had established a short position in March silver futures at $78 per ounce. The trade had clear targets and strict exit conditions: a profit target of $40 per ounce, meaning a bet on silver prices halving; and a stop-loss order set at $92 per ounce to prevent unforeseen and sustained market surges. On Wednesday (January 7), March silver futures closed at $77.98, a single-day drop of nearly 4%, seemingly confirming his bearish assessment.

Logical Analysis: Multiple Negative Factors Converge into a Storm

TD Securities' aggressive short-selling move was not a spur-of-the-moment decision, but rather based on a series of analyses of deep-seated structural changes in the market. Its core logic comprises three interrelated negative expectations:

First, there's the forced selling pressure from the annual index rebalancing. Gali points out that during the index rebalancing process at the beginning of the new year, up to 13% of COMEX silver market open interest is expected to be systematically sold off in the next two weeks. This rule-driven selling, unrelated to short-term fundamentals, could trigger a sharp revaluation and decline in silver prices.

Secondly, the fundamental supply and demand expectations have undergone a complete reversal. Although last year's surge in silver prices stemmed from tight physical supply chains, a persistent gap in industrial demand, and the depletion of above-ground inventories, TD Securities believes that the current high prices are themselves triggering a "reflexive" adjustment. On the one hand, high prices will suppress industrial demand, causing the long-standing structural deficit to begin to narrow; on the other hand, the supply chain freeze that the market had previously worried about due to the possibility of the US imposing tariffs on silver imports is expected to be alleviated. The institution judges that the tariffs will ultimately not be implemented, at which point the large amount of physical silver "trapped" in the US will flow back into the global market, easing the tight spot market situation.

Finally, the receding technical squeeze risk and the signal of a cycle top. Last year's market frenzy and short squeeze were considered by institutions to have over-priced in expectations. With the supply-side tightness expected to ease and the timeline for inventory depletion extended, Gali explicitly marked these signs as "characteristics of a cycle top."

Historical Lessons and Future Risks: Lessons from the Past and Potential Variables

It should be noted that this is TD Securities' second attempt to short silver in a short period. Last October, when silver prices broke through $50, the firm established a short position, but ultimately exited with a loss of approximately $2.4 million. This time, their "comeback" with a more aggressive target price demonstrates their strengthened belief in their previous strategy.

However, the market also faces the risk of overturning its judgment. The most significant variable is that if the US does impose tariffs on silver imports, it will severely impact its domestic manufacturing sector (as its domestic production falls far short of consumption). This policy uncertainty remains a crucial potential factor supporting silver prices. Many analysts also believe that the likelihood of additional tariffs is low based on this.

Summary: A high-stakes gamble on a cyclical turning point

In short, TD Securities' short selling was a comprehensive gamble based on three key factors: macroeconomic selling pressure, the activation of the supply-demand rebalancing mechanism, and the peak of the market sentiment cycle. It bet its short-term silver price trend on technical selling pressure from the New Year's index rebalancing and the economic principle that high prices will eventually correct imbalances in the physical market. Regardless of the outcome, this top investment bank's "short-sweep alarm," delivered with real money and a clear price target, has sounded a heavy alarm for the overheated silver market, and a battle between bulls and bears regarding the continuation of the bull market has begun. Whether the target price of $40 per ounce can be reached in the next three months will be a key benchmark for testing market logic.

At 15:31 Beijing time, the COMEX silver futures contract is currently trading at $75.55 per ounce.