Retail merchants target the silver market after their successful attack on short sellers at game retailer GameStop.
The world’s largest silver-backed exchange-traded fund, the iShares Silver Trust, recorded nearly $ 1 billion in tickets on Friday, according to data from the fund’s sponsor BlackRock. The jolt of new investments came after a user on Reddit’s WallStreetBets forum asked people to buy stocks and options to tighten banks.
Silver prices rose 6% to $ 28.61 / troy ounce at the start of the Asian trading session on Monday. This followed a 6 percent jump last week and a recovery in the shares of the precious metal miners, with First Majestic, listed in New York, up 29 percent. “It is a foolish mission, it is financial anarchy; someone is going to get hurt, ”said Ross Norman, a veteran precious metals trader.
Last week, user TheHappyHawaiian said that buying ETF shares “would force physical delivery of silver” into the fund’s coffers, thereby causing a “small squeeze” in the market, raising the price of silver.
The user said on the forum that it would be “incredible” to make large banks active in the future market “pay dearly” for what he claimed to be bets that the price of silver will fall. The call echoed that of other WallStreetBets users who last week applauded their success in causing huge losses at Melvin Capital and other hedge funds.
The 37.05 million increase in the number of shares of the iShares Silver Trust on Friday was the biggest increase in a day since the ETF started trading in April 2006, data from BlackRock show. The ETF is backed by physical silver kept in vaults, which means it needs to buy the precious metal when it receives new investments.
The attempted “short squeeze” was reminiscent of a similar effort by oil barons William Herbert Hunt and Nelson Bunker Hunt, known as the Hunt brothers, in 1979 and 1980. They bought billions of dollars in silver in an attempt to control the market . Subsequently, they were sanctioned for market manipulation and went bankrupt after the collapse of the price of silver in an event called “Silver Thursday”.
In 1998, Warren Buffett’s Berkshire Hathaway raised silver prices by 90%, to the maximum in 10 years, after he quietly built up a huge position in the silver market.
Analysts said it would be more difficult for retail investors to influence the price of silver than a single asset, given the large off-the-shelf market in precious metals where banks trade on behalf of customers.
“We are confident that the influence of retail investors on silver will not last as long,” said analysts at Commerzbank.
About $ 6 billion in silver hands traded on the silver market in November, according to the latest statistics from the London Bullion Market Association. London’s coffers store about 33,475 tonnes of silver, valued at $ 23.8 billion, they said in January.
Norman said the objective of the Reddit forum for major banks was misguided, since they used futures contracts to protect their physical possessions of silver, meaning they were not speculating about falling prices.
“There is a misconception here that banks are constantly operating short positions, but from a price perspective they are neutral, they have a long and a short position that cancel each other out,” he said.
Additional reporting by Chris Flood in London.