The price of silver (SI = F) shot more than 10% to its highest level since February 2013 on Monday, and briefly traded above $ 30 (£) an ounce., while private investors piled on the commodity.
It became the latest target after a shopping frenzy last week saw the heavily shorted GameStop (GME) and AMC Entertainment (AMC) rebel against major institutional investors.
Recently, amateur traders have bought stocks and assets against which Wall Street funds are betting. Likewise, traders are trying to press silver shorts.
There have been thousands of Reddit posts with multiple mentions of the hashtag #silversqueeze and a series of videos on YouTube encouraging small investors to buy the precious metal.
The rise sent silver miner Fresnillo (FRES.L) up nearly 20% in early London trading, while Glencore (GLEN.L), BHP (BHP.L) and Anglo-American (AAL.L) also rose.
Users of the Reddit forum Wallstreetbets argued that silver is a heavily manipulated market and that a rise in the price of silver could hurt major financial services firms.
“Think of the Gainz. If you don’t care about the profit, think of the banks like JP Morgan that would destroy you along the way,” said one Reddit user.
“Whether it will be as easy to shunt around silver as it was GameStop remains to be seen,” said Russ Mold, AJ Bell’s investment director.
“You can understand why silver is catching the attention of the social media traders who want to express their anger and take advantage of short sellers. Allegations and fines against investment banks manipulating precious metals markets have abounded for some time. More fundamentally, money supply is on the rise, more generally keeping a close eye on markets for signs of inflation and precious metals are traditionally seen here as a potential hedge.
“In addition, gold is currently trading at 70 times the silver price, at the long-term average of 58 times, so on paper silver is cheaper than the precious metals. This will be an interesting test of the conspiracy theories that the prices of precious metals have been kept artificially low. “
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The world’s largest silver-backed exchange-traded fund, iShares Silver Trust (SLV), posted nearly $ 1 billion (£ 730 million) in inflows on Friday, according to data from BlackRock, the fund’s sponsor. It was the largest one-day gain since the ETF started trading in April 2006.
Meanwhile, US bullion broker APMEX said demand was hit as many as six times a working day and more than 12 times a normal weekend day on Friday.
“Combined with the extremely high demand, we are also seeing a strong increase in the number of new customers. On Saturday alone, we added as many new customers as we normally do in a week, ”he said.
According to the latest statistics from the London Bullion Market Association, approximately $ 6 billion in silver was traded in the silver market in November. The London vaults hold about 33,500 tons of silver, worth about $ 24 billion.
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