There are rumblings of a potential “silver squeeze” ahead as Reddit traders attempt to replicate last week’s GameStop GME short-squeeze in the silver market. As a long-time believer in hard assets such as gold and silver, that is a thesis that I can get excited about (unlike GameStop, which is extremely overvalued). The idea behind the “silver squeeze” thesis is that big banks and hedge funds currently have massive short positions in the https://www.wallstreetacademy.net/ silver market for the purpose of suppressing the price of the precious metal. Reddit retail traders have once again taken a position against hedge funds and money managers. The hashtag « Silversqueeze » is top trending on social media channels, including Twitter and Reddit, and retail traders are buying silver like there is no tomorrow. Silver crossed above the $30 mark earlier today, and silver ETFs experienced a massive inflow on Friday.
Some of this move will turn out to be a short-term speculative buying frenzy. But what this whole saga has done is to introduce a massive new following to the silver space. Everyone is buying, and no one is selling the physical metal.
About The Motley Fool UK
You should not invest any money you cannot afford to lose, and you should not rely on any dividend income to meet your living expenses. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, administrative costs, withholding taxes and different accounting and reporting standards. They may have other tax implications, and may not provide the same, or any, regulatory protection.
- Thereafter, for the remainder of February prices actually dropped below the spike high but remained above the pre-squeeze levels.
- I couldn’t fail to have seen the GameStop buying frenzy that has consumed US markets in the past week.
- Gold and silver bullion dealers were nearly completely sold out within days.
- Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.
- DailyFX Limited is not responsible for any trading decisions taken by persons not intended to view this material.
On Friday alone (Jan. 29), the iShares Silver Trust (SLV), the world’s largest silver-backed exchange-traded fund, added nearly $1 billion of inflows. Silver stocks were ripping higher, and many were seeing their trading volumes explode anywhere from 6-10 times normal levels. It’s all related to the now infamous WallStreetBets calls to action, the latest of which targeted silver.
The below silver chart shows the one-day percentage change in price. “There’s far more cash trying to chase physical assets because we’re suffering the bite of inflation, and supply in all of these markets is becoming extraordinarily thin,” explained Eric Sepanek. Watch his full analysis of the forces about to set off a physical silver rally on AZTV’s Mike Broomhead show.
Contact us now at [email protected] to find out more about buying and storing silver bars and coins in a secure and private manner. Jesse is now a popular and controversial financial media personality with over 200,000 social media followers and nearly 10 million views per month on all platforms. Blackrock’s BLK iShare Silver Trust, which represents the largest silver ETF, saw an unprecedented inflow on Friday. Nearly $944 million was poured into this ETF on Friday alone.
Is There a Silver Squeeze Coming?
Exchange rate charges may adversely affect the value of shares in sterling terms, and you could lose money in sterling even if the stock price rises in the currency of origin. Any performance statistics that do not adjust for exchange rate changes are likely to result in an inaccurate portrayal of real returns for sterling-based investors. Shortly after the news of a possible silver squeeze there were many posts on the subreddit denouncing this move as members sought to distance themselves from the idea. Despite having a consistent motive to the previous short squeezes – a protest against short-selling hedge funds – there are a number of issues when it comes to shorting the silver market. The first and second silver squeezes were said to have been conducted via the world’s largest silver Exchange Traded Fund (ETF), iShares Silver Trust, which has a $15.97 billion market cap at the time of writing.
The candlestick chart below highlights the gap up in the price of the fund with an almost immediate retracement bringing prices back to where they were before the massive inflows. The surge in volume is circled in red, while the average true range (ATR) indicator – which depicts an average of daily price movement – also peaked. Thereafter, the WallStreetBets community decided to turn their sites towards the silver market in an attempt to raise the price of a market that has long been rumored to be intentionally suppressing prices. Its goal is to closely mimic the performance of the price of silver. « Shares of the Trust are not subject to the same regulatory requirements as mutual funds, » according to the iShares site.
Dealers are asking for 35% premiums… and that’s if you can get your hands on any silver at all. I couldn’t fail to have seen the GameStop buying frenzy that has consumed US markets in the past week. The American video game retailer is in a very unusual situation. This doesn’t mean manipulation isn’t taking place, though, and the saga of the Hunt brothers proves this is something that can happen.
How to be part of Silver Squeeze 2.0
That’s because the precious metal is heavily shorted – meaning there’s a large number of futures contracts predicting the price will drop. If this doesn’t happen, “shorts” will have to pay the difference in price. At one point, the billionaire brothers owned one-third of the world’s silver supply. Their actions caused the price of silver to rise from $6.08 per troy ounce at the beginning of 1979 to $49.45 just one year later. In the end, their investments in futures contracts were their undoing. Silver prices recorded two consecutive weeks of gains on Friday, following two back-to-back weeks of losses.
Silver Investment
To understand the silver squeeze, you first need to know the meaning of a short squeeze. Short-sellers borrow shares of stocks that they expect to drop in price. Then they sell the stock and attempt to buy it back at a much lower price. It was shortly after the Reddit-fueled, meme stock saga that the silver market landed squarely in the cross-hairs of the online community.
And yet, I remember well, less than a year ago in mid-March when the world started a major lockdown in response to the Covid-19 pandemic. Gold and silver bullion dealers were nearly completely sold out within days. In some cases, silver premiums reached historic highs, near 100% of spot prices. If a lot of new investors rush to buy silver, raising the price, the short-sellers will be forced to buy it back at a much greater price. It’s more complex than that, but this is the bones of a silver squeeze. To short, or short-sell means borrowing a share or commodity, and then selling it.
Here’s What Really Happened to Silver
Our ultimate goal is to help extend our award-winning customer service to our educational content. Ultimately, we want you to feel comfortable and informed when making investment decisions, regardless of whether that is with us or not. Some of the biggest recent happenings in the investment world have arisen thanks to users of the Reddit website and app. The insane increases seen in GameStop and AMC share prices had their inception in the WallStreetBets community, and the big news in silver is at least partially attributable to WallStreetSilver.