The most actively traded futures contracts for silver gained 2.1% on Thursday.
David Gray/Bloomberg News
Update 28. January 2021 at 4:38 p.m. Eastern time.
Day traders turn to commodities.
Prices of silver futures and shares of silver mines rose Thursday after a user of the popular Reddit WallStreetBets forum wrote about conducting a short squeeze on the notoriously volatile precious metal.
The most active futures contracts for silver closed 2.1% lower at $25.922 per troy ounce, after earlier gains of up to 6.7%, and U.S. stocks closed 2.1% lower.
The Majestic’s first silver body.
a mining company, ended the day 21% higher. The iShares Silver Trust, a popular exchange-traded fund for silver, also rose.
Silver has generally weakened in recent weeks, and like other precious metals, it has remained in a narrow trading range well below the multi-year high it reached during last summer’s rally. But Thursday’s surge brought the metal back to a high that at one point was nearly eight years.
These moves represent what some analysts have called the inevitable movement of day traders into other asset classes after seeing the rise of popular stocks like
AMC Entertainment Holdings Inc.
These moves have taken over Wall Street, with individual investors taking over hedge funds that make money on the downside of these stocks, and big swings in the money market could add to the trading frenzy.
A short squeeze occurs when short sellers borrow an asset, sell it, and try to buy it back at lower prices. When the price of an asset rises sharply, short sellers are forced to buy it back at a higher price to limit their losses by driving it out of the market.
Analysts say price manipulation in the silver market took place several decades ago, including when regulators accused the Hunt brothers of raising prices in 1979 and 1980.
The Reddit item referenced comes from
& Co, a major precious metals trader and the country’s largest bank. Money stocks such as First Majestic and ETFs available to ordinary investors were also mentioned. It is notable that silver futures also rose on Thursday, as they are generally less frequently traded by individual investors.
Some notable precious metals bulls have noticed big swings.
The CEO of Euro Pacific Capital, said on Twitter that the move to silver shows that Reddit day traders are getting smarter because silver miners have good value.
Shares of money are actually cheap and represent good investment value, he said.
Email Amrita Ramkumaru at [email protected]
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Appears on January 29, 2021 in a print publication called Silver Splashes, when GameStop retailers move on.
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