Silver prices hit an eight-year high on Monday, as the precious metal became the latest asset to be the subject of a trading frenzy triggered by posts on the social network Reddit.
Spot silver hit $ 30 an ounce for the first time since 2013, rising to 10% in the early afternoon, before falling back to around $ 28.82, a gain of over 7 % over the day.
Since the middle of last week, posts on Reddit and YouTube videos have encouraged amateur traders to buy silver, in part because they believed the increase in its physical price could hurt big investors who had bet on paper that he would fall.
The same logic was behind an explosion in the share price of US retailer GameStop, when Redditors pushed up the share price that hedge funds had bet against. S3 Partners, a data provider, said short sellers – investors who had bet on falling stock prices – had lost at least $ 15.3 billion in trade on GameStop since the start of the season. year. Short sellers had significantly reduced the size of bets on the fall in the stock’s value on Monday, S3 reported.
Robinhood, a U.S. firm that offers commission-free retail stock trading, raised an additional $ 2.4 billion on Monday to help it cope with an influx of small investors drawn to buying stocks in GameStop and other companies like AMC Entertainment, a struggling movie channel. The fast-growing company had already raised $ 1 billion on Thursday after the dramatic increase in share purchases forced it to increase deposits with clearing houses, providers of financial infrastructure.
Robinhood also eased restrictions on GameStop shares on Monday, first allowing users to buy up to four shares, then 20 shares, up from one before. However, GameStop shares still fell, losing 30% of their value to $ 225 at the close.
Market analysts said the silver price rally was due to the perception that users of the WallStreetBets forum on Reddit were targeting the metal. However, some forum users, which has been the driving force behind the GameStop share price surge, have cautioned against speculating on money.
A popular article on Reddit’s WallStreetBets group said on Monday that the “silver squeeze” was in fact a “coordinated attack” by anonymous hedge funds that had short-sold GameStop shares and now faced huge losses.
Neil Wilson, chief market analyst at Markets.com, a trading platform, said several factors could be behind the rally in silver and related assets such as silver mining stocks. and exchange-traded funds, which track the price of the metal, which also rose on Monday. .
“What we don’t know is exactly how it’s going: scrapping shorts by worried hedge funds, retail buy bids, ETF flows dragging the physical market, smart money to the top of the trade, or a combination of all of that, “Wilson said.
Some small investors have confirmed that they have invested in the silver. Aaron Cope in Florida was one of the investors with an order for 500 pieces of silver. Cope has been trading silver for eight years, but said he had more than 10 friends who had just started trading money due to the latest news.
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However, some analysts have warned that the size of the silver market means that small retail investors are unlikely to affect the market in the same way they did with GameStop, a single stock.
Craig Hemke, Precious Metals Analyst and TF Metals Report Editor-in-Chief, said: “What they’ve been able to do with GameStop is just individual action and on the other side is the funds. speculative that can be crushed by margin calls. It’s going to be hard to do with the money because it’s a big market and the entities with the short positions are owned by the banks and they have deep pockets.
Dr Elvis Jarnecic, senior lecturer at the University of Sydney Business School, said silver was a “much more liquid market with a lot more buyers and sellers” so the newly empowered investors will represent a much lower percentage of traders.
