there is no way they can close out the short position with physical bullion. there are no stockpiles of that size to be found anywhere, and future production from miners is already spoken for by industry. at the moment they can hedge in otc markets by going long silver in some kind of exotic derivatives to limit their exposure. but someday demand for physical silver bullion will finally overwhelm supply, and then it will re-priced substantially higher.

ted butler spoke about this in an interview you can find at kingworldnews.com. he said silver outperformed gold this week, particularly on friday when gold was off sharply and silver held up comparatively well, that there have been heaby inflows in to the slv etf, and that jp morgan has sustained paper losses of $3 billion on silver and gold in the past month.