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(Kitco News) The silver market is on the move, and it’s not all about price. Investors pile into physical, ETFs and mining.
Last week, the silver movement kicked off the Reddit post, which culminated Monday with price hikes to eight-year highs of $ 30.35 an ounce.
“After successful attacks on short sellers on game retailer GameStop and other highly short-short stocks such as AMC, Nokia, Blackberry and Bed Bath & Beyond, the retailer’s next target has turned to silver,” said Hussein Sayed, lead market strategist at FXTM.
On Friday, the iShare Silver Trust (SLV), the largest silver-backed exchange-traded fund (ETF) in the world, registered a one-day inflow of nearly $ 1 billion. And there will likely be a lot more to come on Monday, as more traders choose to participate, Sayed noted.
Silver miners also saw an impressive rally Friday and Monday as investors looked into the silver mining sector.
In light of this price hike, silver is no longer cheap from a fundamental perspective, Commerzbank analyst Eugen Weinberg pointed out.
“After being below $ 25 a troy ounce some of the time on Thursday, silver prices have risen more than 10% to a good $ 30 this morning. The price explosion has brought the acclaimed gold / silver ratio down to just 63 . ‘,’ Weinberg said Monday.
Analysts are warning investors to be cautious of this kind of frenzy, as the silver market shorts are a different beast from the GameStop game, which Reddit previously encouraged.
“The Wall Street target may be misguided as most major banks hold short positions in the silver futures markets to hedge their physical holdings. When their short positions lose value, their physical positions gain, and so they are neutral from a price point of view,” said Sayed. from.
Much more effort is also required to have a strong and lasting impact on the silver price against a few stocks.
“Silver’s market cap is between $ 1.4 trillion and $ 1.6 trillion, as opposed to GameStop’s $ 1.5 billion before it became a target of retail investors, and much of the market is out of control. scholarship, ”said Sayed.
It remains to be seen to what extent private investors can take silver. “Retailers who simply follow the herd and join the party can suffer huge losses and need to be more rational in their decisions. The new phenomenon may persist for some time, but the longer it stays, the more wrong prices will occur in assets and potentially cause massive damage in the broader market, ”noted Sayed.
Excessive price increases could harm the silver market in the medium term, Weinberg wrote. “It irrevocably destroys some of the physical demand. On the other hand, it means that silver is increasingly seen as an investment metal.”
Regardless, the old trading rules no longer apply in light of this new Reddit phenomenon, Sayed said.
Earnings from big tech names, the Federal Reserve’s monetary policy meeting, Covid stimulus aid, economic data and the introduction of vaccines would have been the main factors affecting markets over the past week. investors and hedge funds that burst from nowhere and took control of the markets, ”he noted.
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