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Erratic trading in underprivileged companies like GameStop that turned markets to fuels last week appears to have migrated to commodities, sending silver prices soaring to an eight-year high.
Silver futures rose nearly 12 percent on Monday (NZT Tuesday) to more than $ 30 an ounce after strong gains over the weekend.
That exuberance extended to companies that extract precious metals, especially silver. Shares of Pan American Silver were up more than 16%, First Majestic Silver was up 25%, Hecla Mining was up 41% and Coeur Mining was up 35%.
On Twitter, #silversqueeze started to be the latest anomaly to emerge from the “WallStreetBets” forum on Reddit.
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Reddit’s online army of merchants has come together for the past week to invest money in underprivileged companies like GameStop and AMC. In the process, they have done great damage to hedge funds who had bet stocks would fall into a surprising reversal of financial power on Wall Street.
But the rush to silver futures has created confusion amid the chaos, and some retailers on Reddit have called the rise in commodity prices a “false flag.”
“IT IS A TRAP!” a Redditor warned.
Michael Probst / AP
Silver futures rose more than 10 percent on Monday, following strong gains over the weekend.
Some of these small traders believe that hedge funds that were looted last week are behind the silver surge.
Communications on messaging forums claim that hedge funds have now been activated on Reddit anonymously, attempting to take them out of GameStop stakes and turn them into silver, but only after the hedge funds have taken significant positions.
If it’s a scam, and no one can say for sure, it may be working.
Shares of GameStop Corp, which marked a seismic and perhaps short-lived power shift in financial markets, fell 30 percent on Monday. But the stock price, as it has been for more than a week, is wildly volatile. The price rose sharply ahead of the opening bell on Monday.
Analysts monitoring the silver markets say there is more to the story than the entry of small investors.
“The asset is traded by a variety of institutional players and it is very likely that those parties have joined the movement to push the metal higher,” wrote Boris Schlossberg of BK Asset Management.
The silver market frenzy spilled over into physical demand for the metal as well, with coin dealers reporting delays in deliveries because they were overwhelmed by demand.
Silver Mountain, a Netherlands-based bullion trader, said on its website that “due to extreme market volatility we are unable to accept new orders at this time,” adding that it expected to reopen in the afternoon.
