Silver broke above $30 an ounce, its highest level since 2013, as the precious metal replaced GameStop (GME) - Get Report as the target of retail investors taking collective speculative action to boost prices of securities and now commodities through online messaging platforms like Reddit's WallStreetBets.
Silver futures jumped as much as 13% to $30.35 an ounce on Comex after a weekend buying binge that reportedly overwhelmed online sellers of silver coins and bars. BlackRock’s iShares Silver Trust (SLV) - Get Report, the largest exchange-traded product tracking the metal, recorded an unprecedented $944 million net inflow on Friday, according to Bloomberg.
Retail sites reportedly were overwhelmed with physical demand for silver on Sunday, including Money Metals, SD Bullion, JM Bullion and Apmex, with several saying they were unable to process orders due to unprecedented demand.
Like the buying stampede in GameStop, AMC Entertainment (AMC) - Get Report, BlackBerry (BB) - Get Report and others that has captivated the financial world in recent weeks, silver’s advance can be traced to Reddit’s WallStreetBets forum.
One post last week declared the metal “THE BIGGEST SHORT IN THE WORLD” and encouraged traders to pile into the iShares trust as a way to stick it to big banks.
The hashtag #silversqueeze was trending on Twitter on Monday.
At the same time, silver differs from stocks like GameStop. For one, the scope for a short squeeze in silver is far less obvious: money managers have had a net-long position on the metal since mid-2019, futures and options data from the Commodity Futures Trading Commission show, Bloomberg reported.
The market for silver also is generally much deeper. GemStock had a market capitalization of about $1.4 billion in mid-January, before the Reddit frenzy sent the company’s value soaring. By contrast, the value of silver sitting in vaults in London is alone worth about $48 billion.
That key difference is already evident in the percentage gains. Silver jumped more than 10% on Monday, but the gains were relatively small compared to GameStop’s 16-fold surge since mid-January.
What’s more, it’s unclear how long retail investors will stick to the silver trade. Already some prominent members of WallStreetBets have advised against it, noting that Ken Griffin’s Citadel Advisors is listed as one of the largest shareholders of the iShares silver trust - a foe of WallStreetBets traders.
“CITADEL IS THE 5TH LARGEST OWNER OF SLV,” one WallStreetBets user wrote on Sunday, referring to the iShares trust’s ticker symbol. “IT’S IMPERATIVE WE DO NOT ‘SQUEEZE’ IT.”
Citadel drew the ire of the WallStreetBets crowd last month after it injected cash into hedge fund Melvin Capital, which lost about 53% in January after being slammed by the Reddit-inspired mob-buying of GameStop shares that forced it to abandon its position.