Silver surges as Reddit army targets precious metals

Silver surges as Reddit army targets precious metals

New York (CNN Business) Move over GameStop, Reddit mania is spreading to the precious metals market.

Meanwhile, retail sites warned customers over the weekend they could not meet skyrocketing demand for silver bars and coins. And “#silversqueeze” is trending on Twitter.

In more recent trading, silver futures were up almost 11%. Shares of precious metals minerrallied 20% in premarket trading, whilerose 15%.

The moves provide another example of the power of a group that has captivated Wall Street and Main Street : WallStreetBets. The Reddit forum sentand other heavily shorted stocks skyrocketing last week, roiling markets and crushing some hedge funds that had bet against those stocks. Robinhood, the free-trading app, came under fire after restricting trades in GameStop and other stocks.

iShares Silver Trust ETF SLV People on WallStreetBets set their sights on silver and thelast week, with some suggesting it could be a way to hurt big banks they believe are artificially suppressing prices.

“SLV will destroy the biggest banks, not just some little hedge funds,” one WallStreetBets user wrote.

Another claimed JPMorgan Chase has been “suppressing metals for a long time. This should be epic. LOAD UP.”

However, some posts on WallStreetBets suggested their movement is being co-opted by hedge funds and there is no coordinated effort in the silver market.

“The Silver Squeeze is a hedge-fund coordinated attack so they can keep fighting the $GME fight,” one thread was titled.

The post said that buying silver “would be a tragic, irreversible decision that not only will most likely not make you any money because the squeeze is fake, it will put you on the sidelines from this righteous and glorious war we are in.”

Still, the Winklevoss twins, who famously sued Facebook’s Mark Zuckerberg and were early backers of bitcoin, both tweeted support for the push by WallStreetBets into silver.

“The #silversqueeze is a rage against the machine,” Tyler Winklevoss tweeted

“If silver market is proven to be fraudulent, you better believe gold market will be next,” Cameron Winklevoss tweeted.

Leading retail sites posted warnings over the weekend that they faced heavy demand.

“Due to unprecedented demand on physical silver products, we are unable to accept any additional orders on a large number of products, until global markets open Sunday evening,” APMEX, which calls itself the world’s largest online retailer of precious metals, wrote in a notice atop its website.

SD Bullion warned that “due to unprecedented silver demand” it would also be unable to accept orders until Sunday evening. Similar notices were posted by Money Metals and other websites.

“It’s not surprising to see the sharp and abrupt uptick in consumer demand overwhelm the physical supply of silver coins held by dealers in the short term,” Ryan Fitzmaurice, a commodities strategist at Rabobank, told CNN Business in an email.

However, unlike GameStop and other unloved stocks targeted by WallStreetBets, silver futures have been strong of late. Hedge funds and other institutional investors had been bullish on silver futures and the precious metal was trading near multi-year highs.

“It is a dramatically different market setup,” Fitzmaurice said. “I am not sure how well this new Reddit trading strategy will fare in futures markets and especially the notoriously volatile commodity markets.”

Silver price hits eight-year high as retail traders take aim

Silver prices raced to the highest level since 2013 after retail traders targeted the silver market following their successful attack against short sellers of games retailer GameStop.

Prices for silver rose as much as 11 per cent to $30 per ounce in early trading on Monday in London. That followed a 6 per cent jump last week and a rally in the shares of some miners of the precious metal.

The world’s largest silver-backed exchange traded fund, the iShares Silver Trust, recorded almost $1bn in inflows on Friday, according to data from BlackRock, the fund’s sponsor. The jolt of investments came after a user in Reddit’s r/WallStreetBets forum urged people to buy shares and options to put a squeeze on banks.

“It’s a fool’s errand, it’s financial anarchy; somebody is going to get hurt,” said Ross Norman, a veteran precious metals trader.

Last week, the user TheHappyHawaiian said buying shares in the ETF would “force physical delivery of silver” into the fund’s vaults, thereby causing a “short squeeze” on the market, pushing up the silver price.

The user wrote on the forum that it would be “incredible” to make large banks active in the futures market “pay dearly” for what he alleged were bets that the silver price will fall. The rallying call echoed that of other r/WallStreetBets users who last week cheered their success in triggering large losses at Melvin Capital and other hedge funds.

The 37.05m increase in the number of shares of the iShares Silver Trust on Friday was the biggest one-day rise since the ETF started trading in April 2006, data from BlackRock showed. The ETF is backed by physical silver held in vaults, meaning it needs to purchase the precious metal when it receives new investments.

The attempted “short squeeze” was reminiscent of a similar effort by oil barons William Herbert Hunt and Nelson Bunker Hunt, known as the Hunt brothers, who in 1979-80 bought billions of dollars worth of silver in an attempt to corner the market. They were later sanctioned for market manipulation and went bankrupt after the silver price collapsed in an event dubbed “Silver Thursday.”

In 1998, Warren Buffett’s Berkshire Hathaway drove silver prices up 90 per cent to a 10-year high after he quietly accumulated a huge position in the silver market.

Analysts said it would be more difficult for retail investors to influence the silver price as opposed to that of a single equity, given the large off-exchange market for the precious metal, where banks trade on behalf of clients.

“We are confident that the influence of retail investors on silver will not last all that long,” analysts at Commerzbank said.

Around $6bn worth of silver traded hands in the silver market in November, according to the latest statistics from the London Bullion Market Association. London’s vaults hold around 33,475 tonnes of silver, valued at $23.8bn, they said in January.

Mr Norman said the Reddit forum’s targeting of large banks was misplaced, since the lenders used futures contracts to hedge their physical holdings of silver, meaning they were not speculating on the price falling.

“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 that cancels each other out,” he said.

Additional reporting by Chris Flood in London

Silver price hits eight-year high – business live

12:21

Media news: The New European, the weekly title launched five years ago to battle Brexit, has been bought by a consortium of investors including ex-BBC director general and New York Times chief Mark Thompson and Lionel Barber, the former editor of the Financial Times.

A group of around 10 investors are backing a management buyout of The New European from Norwich-based publisher Archant, which was bought by private equity group Rcapital Partners last year.

Matt Kelly, who launched the title and led the fundraising, will majority own and run the title as chief executive and editor-in-chief. Gavin O’Reilly, former chief of the previous owner of The Independent, will take the role of executive chairman and is also an investor.

Other backers include TransferWise founder Taavet Hinrikus, Robin Klein, founding partner at LocalGlobe, Balderton Capital founder Barry Maloney and Jeff Henry, the former ITV executive who gave The New European the green light when he ran Archant.

The title, which costs £3 per issue in print, was launched immediately after the Brexit referendum in 2016 as a pop-up publication on a shoe-string budget designed to give Remain supporters a voice. Its editor-at-large is Alistair Campbell, Tony Blair’s former communications director. Post-Brexit it remains a permanent publication with a combined weekly and online circulation of around 20,000, with 2m page views monthly.

Kelly said:

“Since the Referendum, The New European has shown that there is a significant market for high-quality, informative, provocative and entertaining journalism written for an audience who care deeply about both Britain and Europe’s future. “With new investment capital in place and seasoned media investors, we have a very clear vision of how we can better enhance the experience for our readers and employ new innovations and product developments.”

The title, which has consistently made a small annual profit, is expected to make a loss this year but is projected to return to profit next year.