The price of silver (SI=F) rocketed more than 10% to its highest since February 2013 on Monday, briefly trading over the $30 (£ ) per ounce mark, as retail investors piled in on the commodity.
Recently amateur traders have been buying stocks and assets that Wall Street funds bet against. Similarly, traders are looking to squeeze silver shorts.
There have been thousands of Reddit posts with multiple mentions of the hashtag #silversqueeze, and a string of videos on YouTube encouraging small investors to buy the precious metal.
Users in the Reddit forum Wallstreetbets argued that silver is a heavily manipulated market, and that a rise in the silver price could hurt large financial services companies.
“Think about the Gainz. If you don’t care about the gains, think about the banks like JP Morgan you’d be destroying along the way,” a Reddit user posted.
“Whether it will be quite so easy to shunt around silver as it was GameStop remain to be seen,” Russ Mould, AJ Bell investment director, said.
“You can understand why silver is attracting the attentions of the social media traders who are looking to vent their fury upon, and profit from, short sellers. Allegations about, and fines for, investment banks rigging precious metal markets have abounded for some time. More fundamentally, money supply is surging, markets more generally are watching carefully for any signs of inflation and precious metals are traditionally seen as a potential hedge here.
“In addition, gold currently trades at 70 times the silver price, against the long-run average of 58 times, so on paper silver is the cheaper of the precious metals. This will be an interesting test of the conspiracy theories that precious metals prices have been kept artificially low.”
The world’s largest silver-backed exchange traded fund, iShares Silver Trust (SLV), posted almost $1bn (£730m) in inflows on Friday, according to data from BlackRock, the fund’s sponsor. It was the biggest one-day rise since the ETF started trading in April 2006.
Meanwhile, US bullion broker APMEX said it saw demand hit as much as six times a typical business day and more than 12 times a normal weekend day on Friday.
“Combined with the extremely high demand levels, we are also seeing a surge in new customers. On Saturday alone, we added as many new customers as we usually add in a week,” it said.
In November, around $6bn worth of silver traded hands in the silver market, according to the latest statistics from the London Bullion Market Association. London’s vaults hold around 33,500 tonnes of silver, valued at some $24bn.
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