On Monday, the price of silver reached its highest level in nearly eight years after traders turned their eyes to the volatile precious metal in red, causing sharp swings in the price.
last week’s action.
The most actively traded silver futures rose more than 10% to $29.76 per troy ounce, the highest price since February 2013, surpassing gold’s modest gain of 0.9%. The rise gave silver one of its biggest daily gains in a decade, complementing the precious metal’s gains of more than 5% last week.
Shares of precious metals companies that could benefit from higher silver prices have risen.
PLC, a London-listed company with mines in Mexico, was up 18%. Premier Majestic Silver Corps, a Canadian miner, jumped 35% before the bell in New York and
Pan American Silver Corp.
also a rose. Platinum futures prices rose 4.1% to $1,127.80 per ounce.
The rise in silver prices is the latest in a series of large market moves caused by day traders exchanging tips and bullying on online forums like Reddit.
The money first flew in late last week, after users of Reddit’s WallStreetBets forum posted a brief backlash, sparked by recent gains in other popular online stocks. The lack of attention from day traders has led to sharp gains in stocks such as GameStop, the embattled video game retailer, putting pressure on Wall Street as individual investors compete with professional traders and investors betting on falling prices.
A shopping mall? Small potatoes. The world silver market? The biggest compression in history, wrote one user on WallStreetBets.
Thin money has a long history of extreme price movements, and Monday’s rally makes traders wonder if individual traders are a big enough force to drive prices higher.
I think they can cause very large shocks because money is a market that has a history of very, very high volatility.
Responsible for the trading of capital market derivatives at BMO. But can they compete with GameStop? I don’t think so.
The movement of money is the biggest target of Reddit traders. Even after an increase in its share price, GameStop’s market capitalization is less than $23 billion.
There are nearly 400 million troy ounces of silver on Comex, the largest silver market in the future, worth about $12 billion at Monday’s prices. According to the London Bullion Market Association, another 1.1 billion troy ounces, worth $32 billion, were deposited in London vaults in November.
The rise in silver prices on Monday followed a rush by individual investors over the weekend to buy physical metal, which is used in electronics, jewelry and photography. Retail silver markets, including Money Metals and APMEX Inc. said Sunday on their websites that they will not be able to process new orders until world markets open, due to unprecedented demand for the metal.
Precious metals have never seen such a sudden revival of interest.
Director of research at BullionVault. Over the weekend, the number of new accounts in the online gold and silver market is nearly four times the daily average since 2020, another record year since BullionVault launched in 2005, he said.
As in the case of GameStop shares, the rise in the price of silver forced traders to look for an explanation, since there was no clear reason for the supply and demand of this metal. Traders and analysts say there is more than enough money to meet demand, especially if owners of jewelry and other silver products get higher prices by increasing the supply of scrap.
It’s just a speculative boom, he said.
Senior Specialist in Precious Metals
ABN Amro Bank.
I don’t think that has anything to do with the main thing.
Money may struggle to hold onto gains, analysts say.
In the case of GameStop, hedge funds betting on the stock were forced to buy the retailer’s shares when individual investors raised the price to avoid large losses, causing the stock to rise.
In contrast, data from the Commodity Futures Trading Commission show that hedge funds and other investors have a net long position in money futures. This suggests that they can benefit from the price increase.
Silver first rebounded late last week after users posted on the Reddit WallStreetBets forum about doing a short push.
The other two types of players in the silver market – producers and traders, such as mine operators and swap dealers, which are mostly banks – have a net short position in silver futures. However, according to traders and analysts, mining companies and investment banks also tend to hold physical money – a long equilibrium position that will serve as a hedge against loss.
The attention of day traders is the latest driver of money, which has traded in a range since records began in 2020 and ended the year up 47%. Silver benefited from the sharp rise in precious metals prices, which pushed gold and palladium prices to record highs. Investors tend to buy precious metals like silver when they are nervous about owning riskier assets like stocks or corporate bonds.
Exchange-traded silver funds, a popular way for individual investors to bet on the price of the metal, also rose before the opening bell. The
iShares Silver Trust,
which raised nearly $870 million on Friday, its largest inflow in a single day (+9.4%).
The two ETFs have been the subject of much discussion on Reddit. Some users have argued that buying shares in ETFs backed by physical metal assets will increase the price of money even more, as these funds buy money when they receive new investments.
-Will Horner contributed to this article.
E-mail Joe Wallace at Joe.Wallace@wsj.com and Sebastian Pellejero at [email protected].
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