SILVER: Strong Hands Are Buying The Dip | Andy Schectman

Key Concepts

• Margin Hikes: Increases in the amount of money required to hold futures contracts, often used to cool down speculative activity.
• Physical Demand vs. Paper Leverage: The distinction between actual metal purchases and speculative trading using financial instruments.
• Comex Delivery: The process of taking physical delivery of metal from the Commodity Exchange (Comex).
• Authorized Participants (APs): Entities authorized to create and redeem shares in ETFs like SLV.
• Backwardation: A market condition where future prices are lower than spot prices, indicating strong immediate demand.
• Strategic Metal: Designation of silver as a critical resource by governments, influencing stockpiling and supply chain considerations.
• LBMA & Shanghai Metal Exchange: Key global trading hubs for precious metals, exhibiting diverging price dynamics.
• 1099B Reporting: US tax reporting requirements for capital gains on sales of precious metals.
• Bricks Nations: The economic alliance of Brazil, Russia, India, China, and South Africa, and their move towards alternative payment systems.

Market Volatility and Precious Metals: A Deep Dive (February 9th, 2026)

This discussion, featuring Andy Schectman of Miles Franklin Precious Metals and Kaiser Johnson of Liberty and Finance, centers on the recent dramatic volatility in the precious metals markets, particularly silver, and its implications for investors. The conversation covers market mechanics, reporting requirements, and the broader geopolitical context influencing metal prices.

I. US Mint Silver Eagle Pricing & Value Proposition

The discussion began with a clarification regarding the pricing of American Silver Eagles. Miles Franklin and other dealers offer Brilliant Uncirculated (BU) coins with a mirror-like finish at a more competitive price than the US Mint’s uncirculated versions. Schectman explained that the Mint’s uncirculated coins offer minimal added value – essentially “lipstick on a pig” – and are primarily appealing to collectors, not investors building a core position. The BU coins from dealers offer the same silver content at a better price. The mirror-like finish is aesthetically pleasing but doesn’t justify the price premium from the Mint.

II. Reporting Requirement Misinformation & Tax Updates

A significant portion of the conversation addressed concerns about a supposed new federal reporting requirement for precious metal transactions taking effect February 14th. Schectman emphatically debunked this claim, stating he found no evidence of such a law. He highlighted the rigorous compliance standards Miles Franklin operates under and confirmed no changes were communicated to them. He pointed to misinformation circulating on certain online channels, potentially aimed at inducing selling pressure.

However, he did clarify a change implemented July 1st, 2025: a relaxation of 1099B capital gains reporting requirements. Previously, numerous transaction types triggered reporting; now, it’s limited to transactions exceeding a Comex deliverable contract size (e.g., 5,000 silver bars, 3 gold kilos, or 100-ounce gold bar). Liberty and Finance offered to provide a simplified list of these new requirements via email (libertyandfinance@protonmail.com) with “1099” as the subject line.

III. The Recent Market Shakeout & Margin Hikes

The core of the discussion focused on the dramatic price swings in the metals markets over the past nine days. After a period of strong upward momentum, a significant price drop occurred, followed by a rapid rebound. Schectman attributed this volatility to several factors:

• CME Group Margin Hikes: The CME Group raised margins to all-time highs, increasing the cost of hedging positions exponentially. While initially bearish, Schectman argued margin hikes are ultimately bullish because they force out leveraged speculators and transfer metal into “stronger hands.” The margin calculation now includes a percentage based on contract value and volatility, exacerbating the impact.
• Forced Liquidation & Institutional Inflow: The margin hikes triggered a flush of paper positions, causing a price drop. However, the very next day, SLV (the iShares Silver Trust ETF) experienced its largest one-day metal inflow in years – 36.3 million new shares (approximately 33 million ounces of silver) were created, requiring physical metal delivery from Authorized Participants. This indicated institutional investors capitalizing on the discounted prices.
• Strategic Repricing & Bank Involvement: Schectman speculated that the price smash may have been a coordinated effort to flush out speculators and potentially bail out US banks with short positions. He referenced reports indicating US banks were net long on metals.
• Delivery Pressure & Inventory Tightness: Comex registered inventories are significantly lower than in previous years, and the LBMA (London Bullion Market Association) is experiencing depletion. This tightness in physical supply, coupled with rising demand, is driving the market.

IV. Global Market Fragmentation & Geopolitical Shifts

Schectman highlighted a broader trend of global market fragmentation, moving away from a unified global market towards regional differences. He pointed to:

• The Rise of BRICS: The BRICS nations (Brazil, Russia, India, China, and South Africa) are developing alternative payment systems (Embridge, SIPs) that bypass the US dollar and settle imbalances in gold. This reduces demand for US Treasuries and strengthens the case for gold as a reserve asset.
• Strategic Stockpiling: Governments are increasingly treating silver as a strategic metal, evidenced by the US government’s new “Project Vault” initiative to stockpile critical minerals.
• Arbitrage Opportunities: Price discrepancies between markets (e.g., Comex vs. Shanghai) are creating arbitrage opportunities, with physical metal flowing to where it’s most valued. The Shanghai Metals Exchange is offering significantly higher prices, incentivizing metal to move eastward.

V. Comex Delivery Dynamics & March Contract

Schectman analyzed the March silver contract, noting open interest (contracts potentially standing for delivery) at 80-81 million contracts (over 400 million ounces). This contrasts with the 103.5 million ounces of registered silver available for delivery. If even 10% of the March contracts stand for delivery, it would represent a significant portion of the registered supply. He anticipates potential “fireworks” leading up to the March delivery date, with the possibility of backwardation (future prices lower than spot) and tightening spreads.

VI. Key Takeaways & Preparedness

Schectman concluded that the recent market events were contrived but ultimately bullish, signaling a shift in control from speculators to institutional investors with the financial capacity to stand for delivery. He emphasized the importance of:

• Physical Metal Ownership: Holding physical metal as a hedge against economic uncertainty.
• Preparedness: Prepositioning purchases during calmer periods to avoid logistical bottlenecks and price spikes during times of crisis.
• Patience: Recognizing that the precious metals market can be volatile and requires a long-term perspective.
• Due Diligence: Verifying information and avoiding panic-driven decisions.

Notable Quote:

“Margin hikes don’t end bull markets in metals in my mind. They usually mark the point where the next leg higher becomes inevitable because now it's in strong hands.” – Andy Schectman.

The overall message is that while the recent volatility was unsettling, it represents a healthy shakeout in the market, transferring ownership to those with the resources and intent to hold physical metal. The long-term outlook for precious metals remains positive, driven by geopolitical shifts, strategic stockpiling, and tightening supply.