Price of Silver Surges After Retail Investors Flood the Market


On Monday, retail investors drove the price of silver up as much as 13 percent, to $30.35 per ounce, an 8-year high.

The rally in the precious metal also drove shares of silver-mining companies up. This was again comes as result of a massive influx of retail traders that are trying to squeeze major Wall Street firms. However, the shift to silver raised controversy on the popular subreddit WallStreetBets. Many redditors believe that retail investors should "hold the line" on GameStop and not shift their capital elsewhere. "By buying silver/going long on silver, you would be directly putting money into the pockets of the EXACT HEDGE FUNDS ON THE OTHER SIDE OF $GME," one user posted.

GameStop was down more than 24 percent as of 1:07 PM EST on February 1, 2021.

Last week, retail investors following the subreddit were able to drive the price of GameStop up more than 400 percent. The massive increase forced hedge funds to cover their shorts and lose more than $19 billion. Hedge funds covering their shorts also drives up the price and is known as a short squeeze.

Now, the hashtag #silversqueeze has started to trend on Twitter. One trader, Cameron Winklevoss, tweeted "If Silver market is proven to be fraudulent, you better believe Gold market will be next." The subreddit took notice of the heavily shorted metal and has been encouraging their counterparts to flood the market with demand and drive up the price. However, data from the US regulator revealed that many money managers are bullish on the metal.

Experts expressed skepticism of the rally in the precious metal. Adrian Ash, director of research at precious-metals platform BullionVault, said, "the sudden inflow of money driving this spike will also need to be sustained and repeated if silver is going to run higher." He added: "The basis for Reddit's 'silver squeeze' is flimsy at best. Speculative short-selling in silver has been very tame in New Year 2021, and the commercial side of the industry will only grow its price-hedging the higher it goes. So there just isn't the structural opportunity which a heavily shorted small company might offer."

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Economics, Finance and Investing