According to Kitco, the global commodity market has just experienced a volatile trading session when CME Group suddenly suspended electronic trading for metal and natural gas contracts at a time when silver prices were rising sharply, exceeding the 90 USD/ounce mark.
According to an official announcement from CME sent to Kitco News on February 28, the reason for the suspension of trading is due to a technical problem on the Globex system.
Futures contracts and metal and natural gas options were suspended from 12:15 pm (US Central time) on February 27. 2. The natural gas market reopened at 12:50 pm, and the metal market reopened at 1:45 pm on the same day.
CME said that all orders in the day and GTD orders (valid until the end of the trading day) were cancelled, while GTC orders (valid until cancelled) remained unchanged.
Happening at the right "sensitive time
The incident occurred right before the first delivery announcement of the March silver contract - an important milestone for the market. Notably, the time the system stopped operating was also when the silver futures price was testing the peak above 91 USD/ounce, after just regaining the 90 USD mark.
Mr. Kevin Grady - Chairman of Phoenix Futures and Options - said that the suspension of trading has certainly disrupted trading and payment activities (TAS). However, according to him, the impact may be more serious for energy traders than metals.
In energy contracts, when it comes to maturity, delivery must be carried out. That makes the pressure greater. With metals, investors can handle more flexibly through notification and re-delivery mechanisms" - Mr. Grady analyzed.
However, he also admitted that the market is showing many speculations. "The conspiracy theorists are talking a lot. After this incident, there will certainly be more speculation," he said.
Concerns about "restricting the short selling" of silver and materials
Meanwhile, billionaire Eric Sprott - founder of Sprott Inc - believes that the market is witnessing a global wave of short selling of physical silver.
There is no doubt that there is a wave of physical short selling" - Mr. Sprott told Kitco. According to him, silver inventories at major centers such as LBMA, CME and the Shanghai Gold Exchange are declining rapidly.
He cited that in Shanghai alone, inventory decreased by 10% in one day, to about 11 million ounces - a level he considered very low compared to the size of the Chinese market.
According to Mr. Sprott, there are still about 500 million ounces of silver in short selling positions on the Comex exchange, mainly held by banks. This may increase the risk of price volatility if physical supply continues to shrink.
Mr. Peter Schiff - Managing Director of Euro Pacific Asset Management questioned the transparency of the market in the context of high demand for physical silver.
According to him, citing "technical incidents" may be a safer explanation instead of announcing deeper issues related to liquidity. "If there is a real problem, they will not want the market to know. And if the truth can cause prices to rise more sharply, then stopping trading for technical reasons is a convenient excuse" - he said.
On social network X, CME's post about the incident attracted more than 1,000 comments, many opinions expressed skepticism and requested management agencies to investigate. Some investors said that the incident occurred "too coincidentally" when silver prices were breaking through the important resistance zone.
Silver prices continue to fluctuate sharply
Despite the controversy, silver prices still maintained their upward momentum. This development takes place in the context of information that the US issued an evacuation order for citizens from Iran, increasing geopolitical concerns and boosting the demand for safe-haven assets.
The incident at CME not only disrupts trading in the short term but also raises big questions about market infrastructure and transparency in the context that silver prices are entering a sensitive phase. Investors are currently waiting for more official information from regulators as well as more detailed feedback from CME in the coming days.
