Day traders are turning their attention to other commodities. On January 28, 2021, silver futures prices and the shares of silver miners are climbing after a Reddit user on the WallStreetBets forum posted something about executing a ‘short squeeze’ in the volatile precious metal.
The most actively traded silver futures added almost 6% to $26.82 a troy ounce, while U.S.-listed shares of First Majestic Silver Corp., a mining company, gained almost 30% briefly after the opening bell. The iShares Silver Trust, a widely preferred exchange-traded fund linked to silver, also rallied on Thursday.
Silver prices were muted in recent weeks, remaining in a tight trading range together with many other precious metals. It was trading below the multi-year highs that it hit during a rally last summer. But today’s gain was pushing the precious metal back almost to its 8-year peak.
These latest moves represent what some of the analysts call an inevitable move by the day traders into other asset classes after outsize gains in popular stocks like GameStop Corp. and AMC Entertainment Holdings Inc. The latest moves have captivated the entire Wall Street as individual investors take on the hedge funds that wagered on the significant declines in those stocks.
Big swings in the silver markets may add some steam to the frenetic trading. A short squeeze happens when short sellers borrow an asset and then sell it. They will then try to buy back at lower prices. In the scenario that the asset’s price rises steeply, the short sellers are forced to repurchase at higher prices to minimize their losses after getting ‘squeezed’ out of the market.
Silver Market Movements
Experts and analysts have claimed that price manipulation in the silver market goes back to several decades which includes when the regulators famously accused the Hunt brothers of pushing up prices in 1979 and 1980.
The Reddit post was seen taking on JPMorgan Chase & Co., a major precious metals trader and the country’s biggest bank. Notably, it highlighted silver stocks like First Majestic and ETFs that are accessible for small investors. Silver futures are also surging since they are normally less frequently traded by the small, everyday investors.
Some of the precious metal bulls are taking notice of the major swings. The CEO of Euro Pacific Capital, Peter Schiff, mentioned on Twitter that the move into the silver markets shows that the Reddit day traders are becoming smart since silver miners have good value. He stated:
“Silver stocks are actually cheap, and represent good investment value.”