Silver is rising as GameStop day traders move to other assets

The most actively traded silver futures closed 2.1% at $ 25.922 against troy ounces after adding 6.7% previously, while US-listed shares of First Majestic Silver Corp.

AG 21.38%

, a mining company, ended the day at 21%. The iShares Silver Trust, a popular exchange-traded fund tied to silver, also rose.

Silver prices have generally been muted in recent weeks, remaining in a tight trading range alongside other precious metals, well below the multi-year highs it reached during a rally last summer. But Thursday’s gains at one point pushed the metal back near that nearly eight-year peak.

The moves represent what some analysts called an inevitable move by day traders to other asset classes after outrageous gains in popular stocks like GameStop. Corp.

GME -44.29%

and AMC Entertainment Holdings Inc.

AMC -56.63%

The moves have fascinated Wall Street, as individual investors attract hedge funds that bet on declines in those stocks, and large swings in the silver market can contribute to hectic trading.

A short squeeze occurs when short sellers borrow, sell and try to buy back an asset at lower prices. When the price of an asset rises sharply, short sellers are forced to buy back at higher prices to minimize their losses, thus “squeezing” them out of the market.

Analysts have argued that price manipulation in the silver market goes back decades, including when regulators famously accused the Hunt brothers of pushing prices up in 1979 and 1980.

The Reddit post referred to entering into JPMorgan Chase & Co., a major precious metals merchant and the country’s largest bank. It also mentioned silver stocks like First Majestic and ETFs that are accessible to everyday investors. It is noticeable that silver futures also rose on Thursday, as they are usually less frequently traded by individual investors.

Some notable bullion bulls pay attention to the large swings. Peter Schiff, CEO of Euro Pacific Capital, said on Twitter that the move to silver shows that the Reddit day traders are getting smarter because silver miners have good value.

“Silver stocks are actually cheap and represent good investment value,” he said.

Write to Amrith Ramkumar at [email protected]