The investor frenzy that generated big gains in everything from GameStop Corp. even silver, is showing signs of fatigue.
The metal fell more than 5% at Comex Tuesday, sinking from an eight-year high after margin requirements were raised and analysts warned against the pursuit of the high. GameStop, whose Reddit-inspired rise sparked a wave of purchases in other heavily sold stocks, fell 16% on the US floor on Monday, extending a 31% drop during the regular session.
Other high-flyers, including AMC Entertainment Holdings Inc. and Koss Corp. it also plummeted at the end of the New York trading session. Some of last week’s biggest gains in Asia, including China Literature Ltd. lagged benchmarks on Tuesday.
No one knows whether this marks an inflection point for the manic gains that have spread from one asset to another in recent weeks. But the pullback gives credit to market watchers, who said it was only a matter of time before the hikes start to subside.
Silver’s setback “is not surprising, since any long-term price increases due to social media-oriented collaboration and conspiracy theories would always be unsustainable,” said Gavin Wendt, senior resource analyst at MineLife Pty. difference, however, between trying to manipulate stock trading compared to a large exchange-traded commodity. “
Silver rose 13% on Monday after becoming one of the most recent – and largest – investments to gain attention on Reddit’s WallStreetBets forum.
It is not yet clear who was the author of the posts that started the big race, or who exactly was behind the negotiation. Reddit’s own posters now appear to be in conflict with trade and market watchers have warned that chasing a commodity would be a more difficult proposition than squeezing out individual stocks.
The speculative activity that broke out online captivated global markets after triggering large swings in stocks like GameStop, although fears that the frenzy may make the bullish stock market unfeasible have started to recede. US regulators have said they are following developments closely.
The most active silver futures fell by 5.5%, to $ 27.81 an ounce at Comex, after the CME Group said margins will rise from $ 14,000 to $ 16,500 per contract, starting at 2 of February. normal review of market volatility to ensure adequate guarantee coverage, ”he said.
“Fundamentally, I do not believe that there are significant short positions in the silver market, as the prospects for silver are robust this year, with strong performance in 2020,” said Wendt.
As the frenzy grew, BlackRock Inc.’s iShares Silver Trust recorded an unprecedented net worth of $ 944 million influx on Friday, followed by another $ 551 million on Monday, after a removed post appeared on the WallStreetBets forum that encouraged traders to stack up on the exchange-traded product. This move now appears to be failing, with some on Reddit encouraging their fellow investors to move away from silver.
“We suspect that prices will remain volatile,” said James Steel, chief analyst of precious metals at HSBC Securities (USA) Inc., in a note before the margin increase was announced. “In addition to this week, and possibly earlier, we believe that new market participants may get tired and start to liquidate shares in silver, with a proportional price impact. Buyer, watch out! “
– With the help of Jake Lloyd-Smith, Ranjeetha Pakiam and Sunil Jagtiani