By Joe Wallace and Amrith Ramkumar
Online investors who spurred a trading frenzy in the shares of
GameStop Corp. and AMC Entertainment Holdings Inc. have moved onto
the global silver market, powering the precious metal to its
biggest one-day advance in more than a decade.
Futures prices for silver in New York on Monday settled at their
highest level in eight years, the latest work by a loosely knit
group of speculators who congregate on social-media platforms
including Reddit's WallStreetBets. Some participants have been
contending aggressive buying could power GameStop-like,
quadruple-digit percentage gains in other arenas, with some chatter
over the weekend focusing on the roughly $50 billion market for
The idea of buying silver in unison was mentioned in the popular
Reddit forum WallStreetBets last week, then quickly spread to other
corners of the internet, even as many Reddit users said they
weren't behind the silver-market advance. Many investors piled into
silver bars and coins online, along with silver-linked exchange
traded-funds and shares of silver producers.
Many traders with experience in commodities say the trade is
highly speculative. There is more than enough silver to meet
industrial demand for everything from semiconductors to solar
panels, and producers can raise output to take advantage of higher
prices. Previous efforts to corner the market have ultimately
preceded crashes, most famously when the Hunt brothers are alleged
to have artificially boosted silver in 1979 and 1980.
Still, the recent wave of speculation is unlike anything many in
commodities have witnessed in the recent past. Shares of miners
like First Majestic Silver Corp. and Hecla Mining Co. have been
among the stock market's best performers recently -- each rose 20%
or more on Monday -- while the largest exchange-traded fund tied to
silver logged its biggest-ever daily inflow on Friday. Online
silver dealers around the country have even reported soaring demand
from retail buyers.
"It's become like the GameStop of commodities," said Edward
Meir, a consultant focused on metals at brokerage ED&F Man
Capital Markets. "It doesn't make any sense...It could be equally
ugly on the way down."
The most actively traded silver futures advanced 9.3% to $29.42
a troy ounce, ending the day at a nearly eight-year high after
briefly rising above $30 earlier in the trading session. Prices
have risen nearly 15% in the past week, and Monday's climb marked
the metal's biggest advance since 2009.
Silver's rally echoed the recent leap in GameStop and AMC,
propelled by a phalanx of individual traders gathering online.
Highlighting the risks associated with these trades, GameStop
shares fell more than 30% to $225 on Monday. Shares of the
struggling videogame retailer are still up some 1,100% in the past
month as traders undertake a "short squeeze," forcing investors who
had bet on share-price declines to buy back stock at higher prices
to minimize their losses. That trend can add further fuel to
Professional traders are now weighing whether the flurry of
demand from individuals can sustain the climb in silver -- a market
where trading is still concentrated in a small group of banks.
"They can cause very significant disruption because silver is a
market with a history of very, very high volatility," said Tai
Wong, head of metal derivatives trading at BMO Capital Markets.
"But can they replicate a GameStop? Unlikely."
The acting chairman of the Commodities Futures Trading
Commission, which regulates markets for silver futures, said the
agency is watching the action closely.
"The commission is communicating with fellow regulators, the
exchanges, and stakeholders to address any potential threats to the
integrity of the derivatives markets for silver, and remains
vigilant in surveilling these markets for fraud and manipulation,"
Rostin Behnam, the acting chairman, said in a statement Monday.
Silver's climb to start the week was even more remarkable to
market watchers because gold rose only 0.7% and trading in other
commodities was muted. Gold and silver often trade in similar
directions and are seen as safe-haven investments during times of
Depositories at CME Group's Comex -- the biggest marketplace for
silver futures -- are brimming with almost 400 million troy ounces
of silver, valued at around $12 billion at Monday's prices. Vaults
in London housed 1.1 billion troy ounces -- worth $29 billion -- at
the end of 2020, according to the London Bullion Market
Monday's advance followed a weekend rush to buy the physical
metal -- which is used in electronics, jewelry and photography.
Retail silver marketplaces including Money Metals and APMEX Inc.
had notices on their websites Sunday saying they were unable to
process new orders until markets opened because of unprecedented
On Monday, many popular sites for purchasing silver and gold
reported shipping delays or other purchase restrictions.
"Precious metals have never seen such a sudden surge in new
interest," said Adrian Ash, director of research at BullionVault.
Over the weekend, openings of new accounts at the online
marketplace for gold and silver rose to almost four times the daily
average from 2020, itself a record year since BullionVault went
live in 2005, he said.
Many traders and analysts are baffled by the moves in silver and
said the logic behind a "short squeeze" is also questionable.
In GameStop's case, hedge funds that had bet against the stock
were forced to buy the retailer's shares when individual investors
drove the price higher to avoid bigger losses, propelling the
shares even more. But for silver, hedge funds and other speculators
actually have a net long position and stand to benefit from rising
prices, Commodity Futures Trading Commission data show.
"This is just a speculative boom," said Georgette Boele, senior
precious-metals strategist at ABN Amro Bank.
A broad attempt by day traders to corner the market in silver
wouldn't be the first time someone has tried to dominate the
precious metals market. Analysts have alleged price manipulation in
the silver market going back several decades, including the episode
with the Hunt brothers more than four decades ago.
Traders are also watching big inflows into the largest ETF tied
to silver, the iShares Silver Trust, and other large funds. These
funds and mining stocks are the easiest ways for individuals to bet
on higher prices. The fact that silver futures themselves are
rising shows that professionals are also trying to profit from the
current excitement, traders say.
ETF buying can also add to market momentum because the traders
who manage the fund must buy physical silver when investors put
more money into the ETF. As a result, large inflows signal that the
metals are in high demand.
Still, many professionals warn the silver rally will also end
"It's devoid of any fundamentals," Mr. Meir said
Paul Kiernan contributed to this article.
Write to Joe Wallace at Joe.Wallace@wsj.com and Amrith Ramkumar
(END) Dow Jones Newswires
February 01, 2021 17:14 ET (22:14 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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