SINGAPORE (Reuters) – A social media-driven shopping spree brought silver to an eight-year high Monday, but the rally was cooled by doubts about the ability of retailers normally focused on stocks to move the prices of larger, more liquid commodities. market.
Video game retailer GameStop, at the center of last week’s “Reddit rally”, slid 30.8% to $ 225, but other stocks in the frenzy that have battered short-sellers extended their march, including BlackBerry .
Silver prices climbed to an eight-year peak of just over $ 30 an ounce before the price gains rose 6.3% to $ 28.70.
Many people anticipating a GameStop-style rally in silver “now realize there isn’t as much buying pressure as some might have thought,” said Michael Matousek, chief trader at US Global Investors.
It was not clear how long the Reddit-fueled rally in stocks shorted by hedge funds would last. It could mean more losses in the broader market this week as funds have to keep selling to meet redemptions or straighten their portfolios. In the longer term, they may have to change strategies.
Stock prices rocketed last week as small traders, organizing on online forums and trading with free brokers such as the online brokerage Robinhood, saddled several powerful hedge funds with losses on their short positions.
The impact of the battle on the broader US market waned on Monday, with stocks ending sharply higher after last week’s steep sell-off. AMC was flat and was up more than 500% this year. Shares of BlackBerry were higher in New York and Toronto trading.
The showdown has drawn criticism from financial regulators, lawmakers and the White House, concerned about possible market manipulation.
Robinhood Chief Executive Vlad Tenev is expected to testify before a committee of the US House of Representatives on Feb. 18, Politico reported Monday, citing people familiar with the case.
Robinhood raised another $ 2.4 billion from shareholders just days after existing investors pumped in $ 1 billion, it said in a blog post. The company, which got angry last week for curbing the purchase of certain stocks, raised the trading limits for GameStop, AMC, Koss Corp and Express.
The company is preparing for an IPO, but it was not clear whether it would follow through with those plans.
Cold water
Traders and analysts poured cold water on the chances of a long-term rally in silver, saying, unlike GameStop, there is no excessive short position and the options market is fairly balanced.
Speculative financial investors were already fairly optimistically positioned, dealers said. Net long positions in COMEX Silver futures and options rose to approximately 44,320 lots on Jan. 26, data from the US Commodity Futures Trading Commission (CFTC) showed.
“Unlike individual stocks, the market for silver is much larger and more complex and therefore more difficult to manipulate,” said Raffi Boyadjian, senior investment analyst at XM, in a note.
Traders were concerned that the Reddit effect could extend to less liquid commodity markets. However, traders said exchange-traded funds that focus on commodities were more likely to be targeted.
The iShares Silver Trust ETF, the largest silver-backed ETF, rose 7.1% Monday. Data showed that his holdings rose by a record 37 million shares from Thursday to Friday alone, each representing an ounce of silver.
Mining giants BHP Group, Glencore and Anglo American were the top six winners on the FTSE 100 in London. Miner Fresnillo was up 8.95% and US small cap miners Hecla Mining and Coeur Mining were up 28.3% and 23.1%, respectively.
Natural gas rose about 10% on Monday, in part due to expectations for colder weather, although such moves are not out of the norm for that market.
Retail investors on the popular Reddit online forum WallStreetBets on Monday expressed concern that betting on silver is undercut their focus.
“By buying silver … you would immediately put money in the pockets of the EXACT HEDGE FUNDS ON THE OTHER SIDE OF $ GME,” wrote one user urging investors to keep buying GameStop. “It will put you on the sidelines of this just and glorious war we find ourselves in.”
Shorting shares of GameStop will cost hedge funds a total of $ 12.5 billion in January, data from financial analysis company Ortex showed Monday.
Hurt short sellers
The silver furor started Thursday after reports on WallStreetBets urged investors to buy physical silver.
“Go out and buy 4 ounces of silver as soon as possible,” a forum participant posted.
Retailers deposited a record amount of A $ 40 million ($ 30.6 million) into the Australian ETF Securities’ Physical Silver fund by noon. A silver ETF in Japan was up 11%.
Worldwide short interest in silver, or the cumulative value of bets falling in price, is equal to about 900 million ounces, just below the annual global production.
Banks and brokers hold most of these, but it is not clear whether they are net short on the metal or whether their bets offset very large physical interests.
JPMorgan analysts said the fundamentals did not justify a continued decoupling of silver and gold. The gold price rose by less than 1% on Monday.
(Reporting by Tom Westbrook and Thyagaraju Adinarayan in London and Jeff Lewis in Toronto; Additional reporting by Gavin Maguire in Singapore, Luoyan Liu in Shanghai and Abhinav Ramnarayan, Sujata Rao and Karin Strohecker in London, Lewis Krauskopf, Devika Krishna Kumar and Marcelo Teixeira in New York; Written by Sonya Hepinstall; Edited by Jan Harvey and Matthew Lewis)
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