They may have other tax implications, and may not provide the same, or any, regulatory protection. Exchange rate charges may adversely affect the value of shares in sterling terms, and you could lose money in sterling even if the stock price rises in the currency of origin. Any performance statistics that do not adjust for exchange rate changes are likely to result in an inaccurate portrayal of real returns for sterling-based investors. Nonetheless, it would be unwise to underestimate the purchasing power of retail investors, and the idea of this was clearly demonstrated last week.
Shortly thereafter, the short squeeze was done and GameStop’s stock came tumbling down. The silver price — so the theory goes — has been artificially held down by people (hedge funds, institutions, etc.) who ‘short’ silver. It was shortly after the Reddit-fueled, meme stock saga that the silver market landed squarely in the cross-hairs of the online community. However, the supposed silver squeeze and the one that followed have been rather ineffective when compared to short squeezes on Gamestop (GME) and the like.
- You could lose money in sterling even if the stock price rises in the currency of origin.
- In a few weeks, when the short squeeze story gets stale, and everyone moves on to the next shiny bauble?
- Thousands of young investors are meeting up on internet forums to share information and coordinate their financial plans and actions.
- They believe that silver is a highly undervalued asset and that its price is destined to rise.
- Physical silver premiums rose by at least 50% or more but it does not mean that physical silver is running out.
“There’s far more cash trying to chase physical assets because we’re suffering the bite of inflation, and supply in all of these markets is becoming extraordinarily thin,” explained Eric Sepanek. Watch his full analysis of the forces about to set off a physical silver rally on AZTV’s Mike Broomhead show. The Hunt brothers managed to accumulate two-thirds of the entire global supply of privately owned silver. However, in January 1980, the price of silver declined by over 50% by March, making the Hunt brothers face severe losses and be unable to honor the margin calls that they had been issued by their brokerage lenders. The billions in demand triggered the rise of silver to more than $50 per ounce. The silver bug siblings continued to take delivery and borrowed heavily to take out even more futures on silver once their immediate cash was all tied up.
Scrolling through the many threads in the Reddit group reveals what one might expect from any online community. There are memes, videos, stories and more than a few opinions on the greatness of silver. In the early part of 2021, though, it became more than just a typical Reddit gathering.
Whether you are a seasoned bullion investor or brand new to the game of gold and silver bullion ownership, we’re here to help and serve you in any way we can. Believe it or not, the silver short squeeze has already been attempted and it did have a slight effect on the pricing of silver. The same group of GameStop investors attempted to short squeeze silver in September of 2021. Initially, the investors succeeded but the silver short squeeze was, well, short lived. This would likely create a ‘run’ on gold depositories and bullion banks.
If there is a pullback, prices may retrace to the $27 to $28 price level. Its goal is to closely mimic the performance of the price of silver. “Shares of the Trust are not subject to the same regulatory requirements as mutual funds,” according to the iShares site. The manpower restrictions due to Covid-19 also meant that production schedules for finished silver products had to be extended, especially with the sudden surge in demand.
Internet searches related to buying gold had long dominated similar searches for silver. One look at Google Trends, though, shows that silver overshadowed the yellow metal for an entire week. Rotbart & Co. are bullish on silver in the medium to long term and believe it has much more room for further price appreciation due to the above reasons and to its role as a safe-haven asset. People were pawning coins and silverware to take advantage of the high price of silver, adding to the supply, but there was less than a third of the silver market left that the Hunts did not control via futures. The Hunts also preached their gospel of silver as the true haven in the upcoming inflationary flood to wealthy investors throughout the world and pooled converts’ funds to buy up more silver and futures contracts. Some of the speculators helping the Hunts included Saudi investors—a fact that would become important when the U.S. government started getting interested in the Hunts’ activities.
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This situation has been allowed to continue since most traders who purchase futures contracts choose to settle for cash and rarely take delivery of the actual metal. Allegedly, this can create the false impression that there is an abundance of silver, while in fact, it is in short supply. Unfortunately, the silver market is quite opaque, and we have no way of knowing whether these allegations are true or not. But as far as the people on the newly formed “WallStreetSilver” forum are concerned, this is indeed the truth, and they are determined to expose it.
Silver Thursday: How Two Wealthy Traders Cornered the Market
Right now, the epicenter of this activity is a community called “WallStreetBets’, on the Reddit social network. But the idea is spreading rapidly, and new discussion groups are emerging as we speak. Silver bars – one of the most popular denomination of silver bars purchased remote customer service meaning by our clients over the years (Figure 1). The highest premiums was from late April until June, which was when the Covid-19 pandemic had just started to spread globally and many countries had implemented measures to stem its spread, including widespread lockkdowns.
Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. So retail investors, driven by Reddit and social media, are piling cash into GameStop shares. Silver prices recorded two consecutive weeks of gains on Friday, following two back-to-back weeks of losses. The big bull run started on January 28, when the silver open price was $25.26 and the low was $24.86. On Friday, January 29, silver prices touched a high of $27.65, and this bull run pushed the silver spot price above $30 today.
Hashtag ‘Silversqueeze’ Pushes Silver Above $30. How High Can It Go?
The first and second silver squeezes were said to have been conducted via the world’s largest silver Exchange Traded Fund (ETF), iShares Silver Trust, which has a $15.97 billion market cap at the time of writing. The idea was to buy into the ETF which would force the fund to allocate new shares and purchase silver to back them. A sharp surge in interest in the ETF would lead to a sudden increase in the demand for silver and likely result in a sizeable increase in the price for the commodity. Silver is different in many ways from individual stocks like GameStop, AMC, Blackberry and many more. For instance, having a short squeeze in silver could be difficult because it’s a much deeper and more highly liquid market. For instance, GameStop’s market cap was $1.4 billion in mid-January, but this increased 16 times over when Reddit traders started to talk up the stock.
Press coverage has mostly fizzled, and somehow it seems like nothing is happening. During the turbulent market conditions of 2008, when gold prices gained overall, the leading gold miners index (the HUI) lost nearly 30% of its value. Precious metals shine when measured over an entire inflation cycle, which can last years or even decades. History proves that gold and silver perform well overall in inflationary times.
The Aftermath of the Hunts’ Plan
Let’s take a trip through one of the largest speculative attempts to corner a market—and how it went awry. “The Silver Squeeze is a hedge-fund coordinated attack so they can keep fighting the $GME fight,” one user posted on r/WallStreetBets (GME is GameStop). Among the lies, they tell include whoppers like collectible coins aren’t ever taxable. We often warn against the nefarious tactics of high-pressure “rare” coin salespeople, particularly those working for prominent dealers who advertise heavily on TV.
But there are no discernable shortages in COMEX or LBMA “good delivery bars” – at least not yet. Investment demand has been a big driver of physical off-take, and so has silver’s increasing industrial and green energy applications. Do your own diligence – nothing on this website is financial https://g-markets.net/ advice. The Motley Fool UK has no position in any of the shares mentioned. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. I couldn’t fail to have seen the GameStop buying frenzy that has consumed US markets in the past week.
The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article. Blackrock’s
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iShare Silver Trust, which represents the largest silver ETF, saw an unprecedented inflow on Friday. Some of these were only temporary measures, and many directly targeted the Hunt brothers. Whether these actions were appropriate – many of which received government support – remains up for debate. What it proved, however, was that the “higher ups” could change the rules.
The second silver squeeze or ‘silver squeeze 2.0’ took place on May the 1st – although this fell on a Saturday so much of the price action was captured on May the 3rd. Looking at the chart below this attempt had a more muted effect initially, as price action jumped less than it did the first time around and witnessed significantly lower volume, too. Additionally, one of the most major uses of silver is in the industrial world. Many of the home electronics you have probably have the metal in there.
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