Wall Street's GameStop bug may have mutated; silver surges
Feb 02 2021
The erratic trading in shares of underdog companies like GameStop that turned markets combustible last week appears to have migrated to commodities, sending silver prices surging to an eight-year high. The price went to as low as $132 and as high as $469 on January 28, according to FactSet Research Systems.
Getty ImagesSpot gold rose 0.3% to $1,852.35 per ounce.
The moves are the latest example of small-time traders buying en masse, particularly of stocks and other assets that were heavily bet against, resulting in large losses for major investors.
Silver mining stocks soared in Australia and China and Money Metals, an online exchange for precious coins and bullion, posted an "EXTREME DEMAND ALERT" banner across its homepage, and announced it restricted orders to between $1,000 and $10,000.
The online army of Reddit traders have over the past week rallied to defend out-of-favour companies such as Gamestop and AMC, defeating hedge funds that had bet the shares would fall by selling them short, in a stunning reversal of financial power transfixing Wall Street.
"This isn't predicated on any global events, it's just people on a message board putting all their guns towards the precious metals markets", Bob Haberkorn, senior market strategist at RJO Futures, told Bloomberg.
The silver market is so heavily shorted at the moment that for every $1 rise in its price almost $200 million worth of shorts get liquidated. Over the weekend, openings of new accounts at the online marketplace for gold and silver rose to nearly four times the daily average from 2020, itself a record year since BullionVault went live in 2005, he said. "So it's kind of the flawless storm for silver right now", said Steinmann.
Others suggested WallStreetBets' movement is being co-opted by hedge funds and there is no coordinated effort in the silver market.
European stocks continued the trend in early deals, with London-listed miners up strongly, including Fresnillo, up 18% and leading gainers across the region.
But the tactic of pushing up silver prices could work should investors succeed in tightening the physical market for the metal, according to analysts.
Data from iShares Silver TrustETF, the largest silver-backed ETF, showed its silver holdings jumped by a record 37 million shares from Thursday to Friday alone, each representing an ounce of silver.
This story has been published from a wire agency feed without modifications to the text.