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01 Feb 2021
3 min read

Silver Pushes Higher, Up Over 7% Boosted by Retail Traders

Silver Pushes Higher, Up Over 7% Boosted by Retail Traders

*OspreyFX would like to state that traders should research extensively before following any information given hereby. Any assumptions made in this article are provided solely for entertainment purposes and not for traders to guide or alter their positions. Please read our Terms & Conditions and Risk Disclosure for more information.

Key Takeaways

  • Silver jumps 7% as Reddit traders shift focus
  • US futures slightly positive ahead of the opening

Silver spiked higher on Monday morning during the Asian session. The 7% surge took the price of silver from Friday’s closing level of $26.93 to a high of $29.00, a level not seen since September 2020. The market-moving power of retail traders who gather on the social media platform Reddit will remain in focus this week. The same small traders that blew up GameStop stock last week now have a new aim: silver.

The rally in the metal came after Reddit users decided to collaborate and collectively purchase silver and silver options to put a squeeze on banks. The intention here is to cause another short squeeze, following the one in GameStop, which sent the stock up to stratospheric levels. But this time, the aim is to make large banks that participate in the futures market “pay dearly” for the alleged short-bets against silver.

The attempted short squeeze, however, differs substantially from the one that happened to GameStop last week. Retail traders will need considerably more buying power to influence silver prices. The silver market, according to the latest reports, is worth over $1.5tn and far outweighs the market cap of single equity. Before the buying frenzy took place, GameStop had a market capitalization of almost $1.5bn in mid-January. Presently, shares of the company are up 16-fold to $23bn. Furthermore, liquidity in the silver market is higher given that silver also trades in off-exchange markets. Another factor that makes the short squeeze less obvious is that investment institutions have held net-long positions in silver since mid-2019, according to data from Commodity Futures Trading Commission.

The Reddit Trading Community Targets Corporate Finance

The rally on Monday follows an inflow of cash over the weekend into silver bars and coins. The largest exchange-traded product that tracks silver, iShares Silver Trust, marked a record increase in net inflow on Friday, $944 million. People over the Reddit forum have been calling for the buying stampede in silver for the past couple of weeks. Some posts even ask for the “biggest short in the world”, ie the net short positions in silver, to be countered by the collective long positions of every retail trader who wants to join in the attempt to oppose big banks and large financial institutions, suspected of manipulating the price of silver by keeping it at current levels.

Gold has also attracted some buying power this morning, although not as much as silver. At the opening of the Asian session, the yellow metal spiked with a little over 1%. Gold reached a high of $1,866, from an open price of $1,846, and is now trading near the $1,860 area.

Retail traders seem to be in the spotlight again this week. Determined to send a message to professional investors, billionaires, and financial institutions, they remain active in their attempts to get involved in the financial markets and have their voices heard. The market continues to monitor GameStop shares (GME) which are currently flat in the pre-market hours ahead of the US opening later today. US futures tick higher by roughly 0.50%.

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