Silver Surges as GameStop Day Traders Move Into Other Assets
Futures prices and shares of silver miners climbed
The day traders are moving into commodities.
Silver futures prices and shares of silver miners climbed Thursday after a user in Reddit’s popular WallStreetBets forum posted about executing a “short squeeze” in the notoriously volatile precious metal.
Most actively traded silver futures closed up 2.1% at $25.922 at troy ounce after earlier adding as much as 6.7%, while U.S.-listed shares of First Majestic Silver Corp. AG 21.38% , a mining company, ended the day up 21%. The iShares Silver Trust, a popular exchange-traded fund tied to silver, also surged.
Silver prices had generally been muted in recent weeks, staying in a tight trading range alongside other precious metals that was well below the multiyear highs it hit during a rally last summer. But Thursday’s gain at one point was pushing the metal back near that nearly eight-year peak.
The moves represent what some analysts called an inevitable move by day traders into other asset classes following outsize gains in popular stocks such as GameStop Corp. GME -44.29% and AMC Entertainment Holdings Inc. AMC -56.63% The moves have captivated Wall Street as individual investors take on hedge funds that wagered on declines in those stocks, and big swings in the silver market could add to the frenetic trading.
A short squeeze occurs when short sellers borrow an asset, sell it and try to buy back at lower prices. If the asset’s price rises sharply, short sellers are forced to buy back at higher prices to minimize their losses, getting “squeezed” out of the market.
Analysts have alleged price manipulation in the silver market going back several decades, including when regulators famously accused the Hunt brothers of driving up prices in 1979 and 1980.
The Reddit post referenced taking on JPMorgan Chase & Co., a large precious-metals trader and the nation’s largest bank. It also mentioned silver stocks such as First Majestic and ETFs that are accessible to everyday investors. It is notable that silver futures also climbed Thursday because they are typically less frequently traded by individual investors.
Some notable precious-metals bulls were taking notice of the big swings. Peter Schiff, CEO of Euro Pacific Capital, said on Twitter that the move into silver shows that the Reddit day traders are getting smarter because silver miners have good value.
“Silver stocks are actually cheap, and represent good investment value,” he said.