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Silver has become the latest focus of a frenzied online movement of retail investors looking to increase the value of assets that large fund managers have bet on. Silver prices rose to an eight-year high this Monday (1st) on the international market.
“What we are seeing is an aggressive bullish move in silver, which has obviously helped the mining sector,” David Madden, market analyst at CMC Markets UK, told Reuters.
GameStop: Understand the Operation Behind the New York Stock Market Boom
The price of an ounce (about 31 grams) of the metal exceeded $ 30. According to Bloomberg, over the weekend, online sellers of silver bullion and coins saw demand skyrocket around the world.
The rise in the price of silver is linked to the same group that triggered, last week, the actions of the video game store chain GameStop: the Reddit WallStreetBets forum.
As in the case of GameStop, large hedge funds would ‘sell out’ betting on the fall in the value of the metal, and with the move, WallStreetBets investors could cause large losses to these funds.
In a so-called ‘short sale’ operation, traders ‘rent’ assets (in this case, silver) and sell them to other investors, believing that the price will drop. At the end of a specified period, these operators must return the asset to the original owner, regardless of its price.
If the trader’s bet is correct, he will buy back the assets at a price lower than the sale price and pocket the profits. This type of movement, therefore, is only positive when the price of the asset falls.
But with these assets rising, as with GameStop, investors who bet on falling share prices are forced to buy back a higher price to mitigate losses, in a move known as ‘short squeeze’.
In the case of silver, however, it is more difficult for funds to suffer large losses: this is because the metal market is much larger, as well as availability; In the case of GameStop shares, the funds have a very limited number of shares. on the market that you can buy.
