Retailers have targeted the silver market in the wake of a successful attack on short-sellers of sports retailer Game Stop.
The world’s largest silver-backed exchange-traded fund, i Shares Silver Trust, reported about b 1bn on Friday, according to data from the fund’s sponsor BlackRock. The new investments came after a user of Reddit’s Wall StreetBates forum urged people to buy shares and options to put a squeeze on banks.
Silver rose 6 per cent to 28.61d / l / troy ounce in early trade in Asia on Monday. This was followed by a 29 per cent rise in New York-listed First Majestic, followed by a rise of one per cent last week and a rally in precious metal miners. “It is the imagination of fools, it is financial chaos; It’s hurting someone, “said Ras Norman, a precious metal trader.
Last week, user TheHappyHawaiian said that buying shares in the ETF would result in a “physical delivery of silver” to the fund’s vault, causing a “short squeeze” in the market, leading to a rise in silver prices.
The user told the forum that in a bid to reduce the price of silver, he said it would be “unreliable” to activate big banks in the futures market. The railing call echoed among other Wall StreetBates users, who last week hailed their success in accelerating large losses in Melvin Capital and other hedge funds.
The 37.05 crore rise in shares of Eicher Silver Trust on Friday was the biggest one-day gain since the ETFA began trading in April 2006, according to data from Blacker R. The ETF is supported by the physical silver kept in the vault, i.e. it needs to buy the precious metal when it receives new investments.
The “short squeeze” attempt is reminiscent of similar efforts by oil barons William Herbert Hunt and Nelson Bunker Hunt, known as the Hunt brothers in 1979 and 1980. They bought billions of dollars worth of silver in an attempt to corner the market. He was later allowed to manipulate the market and went bankrupt after the price of silver plummeted at an event called “Silver Thursday”.
In 1998, Warren Run Buffett’s Berkshire Hathaway quietly gained a large foothold in the silver market, after which silver prices rose 90 percent to a 10-year high.
Analysts said that given the large-F-exchange market for precious metals that banks trade on behalf of consumers, it would be more difficult for retail investors to influence the price of silver against a single equity.
“We are confident that the influence of retail investors on silver will not last long,” said Kommersbank analysts.
According to the latest figures from the London Bullion Market Association, the silver market traded at around b 1 billion in November. They said in January that there were approximately 33,475 in London’s vault. Tons of silver, valued at .8 23.8bn.
Mr Norman said the Reddit Forum’s target for large banks had been wrongly changed because they used futures contracts to hedge their silver physical holdings, meaning they did not anticipate price reductions.
“There’s a misconception here that banks are constantly running short positions, but from a spirit standpoint they are neutral, they have long and short ones that cancel each other out.”
Additional reporting by Chris Flood in London.
