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Neil Hume and Henry Sanderson
Shares of silver miners and exchange-traded funds backed by the precious metal rose Thursday as Reddit’s army of daily traders turned their attention to producers of the volatile precious metal.
Fresnillo, the Mexico-focused miner that was hit a day earlier after a disappointing business update, rallied by as much as 10 percent to secure first place on the FTSE 100 performance chart.
Meanwhile, shares in Hochschild Mining, which has operations in Peru and Argentina, rose 7 percent to become the biggest gain in the FTSE 250 index. Those of Canada-based First Majestic Silver, which operates in Mexico, they were up 29 percent on the New York Stock Exchange.
The price increase was not limited to miners. Shares of the world’s largest silver-backed ETF, the iShares Silver Trust, rose 6 percent after a user on Reddit’s WallStreetBets forum urged people to buy stocks and call options.
User u / TheHappyHawaiian said that buying shares in the ETF would “force the physical delivery of silver” to its vaults, thus causing a “small contraction” in the market. That drove the price of silver up. That would present problems for traders who were short of silver in the futures markets, they said.
“The people who sell silver short through the futures markets are a couple of big banks and it would be amazing to make them pay dearly for their over-leveraged nude shorts,” said the user.
Still, Ross Norman, a veteran precious metals trader, said that big banks used futures contracts to hedge their physical silver holdings, so they weren’t “naked shorts.”
“There is a misnomer here that banks are constantly running short positions, but from a price perspective they are neutral, they have a long and a short position that cancel each other out,” he said. “It’s nonsense, it’s financial anarchy, someone is going to get hurt.”
The iShares Silver Trust is backed by physical silver holdings with current holdings of 17,787.58 ounces, according to its website.
Silver prices rose 5 percent Thursday to $ 27 an ounce.
