Retailers have targeted the silver market after their successful attack on game retailers from the game retailer GameStop.
The data from BlackRock, the fund’s sponsor, increased nearly $ 1 billion on Friday to the world’s largest exchange traded fund, the iShares Silver Trust. The stir in new investments comes after a user on Reddit’s WallStreetBets forum asked people to buy shares and options to push banks.
Prices for silver rose 6 percent Monday to $ 28.61 / troy ounce. This followed a 6 percent jump last week and an increase in shares in precious metal miners, with First Majestic listed in New York rising by 29 percent. “This is a foolish assignment, this is financial anarchy; someone is going to get hurt, ”said Ross Norman, a veteran trader in precious metals.
Last week, user TheHappyHawaiian said that buying shares in the ETF would force a physical delivery of silver into the fund’s vaults, which would cause a ‘short press’ on the market, which would increase the silver price.
The user said on the forum that it would be “unbelievable” to make large banks active in the futures market “pay dearly” for what he claims the silver price would fall. The event reflects that of other WallStreetBets users who applauded their success last week by inflicting huge losses on Melvin Capital and other hedge funds.
The 37.05 million increase in the number of shares of the iShares Silver Trust on Friday was the largest one-day increase since the ETF began trading in April 2006, BlackRock data shows. The ETF is backed by physical silver held in vaults, which means it has to buy the precious metal when it receives new investments.
The attempt at ‘short press’ is reminiscent of a similar attempt by oil barons William Herbert Hunt and Nelson Bunker Hunt, known as the Hunt brothers, in 1979 and 1980. They bought billions of dollars of silver in an attempt to conquer the market. They were later approved for market manipulation and went bankrupt after the silver price collapsed in an event called ‘Silver Thursday’.
In 1998, Warren Buffett’s Berkshire Hathaway silver price rose 90 percent to a ten-year high after quietly accumulating a large position in the silver market.
Analysts said it would be more difficult for retail investors to influence the silver price as opposed to the price of a single stock, given the large foreign market for the precious metal where banks trade on behalf of clients.
“We are confident that the influence of retail investors on silver will not last as long,” Commerzbank analysts said.
According to the latest statistics from the London Bullion Market Association, the silver market traded about $ 6 billion in silver in November. According to London vaults, there were 33,475 tons of silver in January, worth $ 23.8 billion.
Mr. Norman said the Reddit forum’s target was misplaced on major banks because they used futures contracts to hedge their physical holdings of silver, meaning they did not speculate on the price drop.
“There is a misnomer here that banks constantly manage short positions, but from a price perspective it is neutral, they have a long and a short that cancel each other out,” he said.
Additional reporting by Chris Flood in London.