EDITOR NOTE: Where were these “activist” Reddit day traders when JP Morgan was suppressing silver prices in the years past? We could’ve used them then, right? Or perhaps this overall movement is partly in response to years of institutional market manipulation. There’s no doubt that anti-elitism and Trumpism had fueled this phenomenon. It used to be that the market was sometimes a battleground between companies, banks, and other financial institutions, as the global economy is often a silent arena for nations. But now, the market is a battleground for ideologically-fueled skirmishes and assaults targeting the “elite.” And like the storming of the US Capitol, the “opponent,” however synchronous and unified, remains amorphous, making it even a more dangerous entity. Of course, we’re not day traders. We’re not even seeking speculative profits. We’re seeking stability by investing in real money. And regardless of the volatility that may play out in the near term, the fundamental horizon sees no other direction for silver than up. So, now’s the time to load up on non-CUSIP silver. Perhaps the Reddit folks will even give your holdings an early boost. Just don’t get shaken out by the counter-response.
Silver jumped for a second day as the market remains on high alert after a call by Reddit posters to create a short squeeze sparked sharp moves Thursday.
Spot silver rose as much as 4.1%, as prices resumed an earlier climb after the dollar erased gains and turned lower. Silver futures also saw sizable moves, increasing as much as 6.9% in New York, and gold prices rose more than 1% in both London and New York.
On Thursday, silver miners’ shares spiked and the largest silver exchange-traded fund, iShares Silver Trust, saw a frenzy of option buying after the market emerged as a target on the Reddit forum r/wallstreetbets. The ETF, available on the Robinhood trading app, saw its biggest trading volume since August.
“In the very short term, I would think people would be cautious about holding a short in precious metals, irrespective of the fundamental view/what other markets are doing,” said Marcus Garvey, head of metals and bulks commodity strategy at Macquarie Group Ltd.
Comments about the metal began appearing Wednesday on the investor board that’s now famous for driving up GameStop Corp. shares this week. They centered on conspiracy theories long-held by the fringes of the precious metals world, alleging the metal’s price is suppressed by banks and the government to mask inflation.
Some Reddit users commented they should return next week once their attack on GameStop shorts is finished. In any case, it’s unlikely that they’ll have the same effect on a commodity like silver, said Adrian Ash, director of research at brokerage BullionVault.
“Short-squeezing a stock with short interest of 140% is one thing, but short-squeezing a physical commodity where market-ready stockpiles are three times average daily futures volume is another,” he said. Thursday’s price spike “will struggle to grab or hold the Reddit crowd’s attention for long.”
Spot silver traded 3.7% higher at $27.5037 an ounce at 1:49 p.m. in London, and gold rose 1.6%. The dollar declined 0.1%, after earlier gaining as much as 0.4%.
Originally posted on Bloomberg