Editor’s note: With so much market volatility, stay up to date with the daily news! Get caught up soon with our quick summary of today’s must-read news and expert opinions. Sign in here!
(Kitco News) The silver market is on the move, and it’s not just about price. Investors stack up in physical, ETFs and mining.
Last week, the silver move began with the Reddit post, which peaked on Monday with prices rising to eight-year highs of $ 30.35 per ounce.
“After successful attacks on short sellers on the game retailer GameStop and other heavily shortened stocks such as AMC, Nokia, Blackberry and Bed Bath & Beyond, the next target of retailers has become silver,” said FXTM chief market strategist Hussein Sayed.
On Friday, the iShare Silver Trust (SLV), which is the world’s largest exchange traded fund (ETF) backed by silver, had a one-day inflow of nearly $ 1 billion. And many more are likely to arrive Monday, as more traders choose to participate, Sayed noted.
Silver miners also experienced an impressive rally on Friday and Monday as investors looked at the silver mining sector.
In light of this price increase, silver is no longer cheap from a fundamental perspective, emphasizes Eugen Weinberg, analyst at Commerzbank.
“After being below $ 25 per troy ounce for some time on Thursday, the silver price rose more than 10% this morning to a good $ 30. The price explosion dropped the highly acclaimed gold / silver ratio to just 63,” “Weinberg said on Monday.
Analysts are warning investors to be wary of this kind of madness, as the shorts in silver are a different beast than the game GameStop, which Reddit encouraged earlier.
“The goal of Wall Street may be misplaced, as most large banks hold short positions in the silver futures market to hedge their physical holdings. If their short positions lose value, they gain physical holdings, so from a price perspective, it is neutral. , “explains Sayed.
Much more effort has also been put into having a strong and lasting impact on the silver price against some stocks.
“Silver’s market capitalization is between $ 1.4 trillion and $ 1.6 trillion as opposed to GameStop’s $ 1.5 billion before it became the target of retail investors, and much of the market is not stock market,” added Sayed.
It remains to be seen how much further the retail investors can take silver. “Retailers who just follow the herd and join the party late can accumulate huge losses and have to be more rational in their decisions. The new phenomenon may continue for some time, but the longer it stays, the more prices will be in assets and possibly lead to major damage to the broader market, ”said Sayed.
Weinberg writes that excessive price increases in the medium term could be detrimental to the silver market. “It irrevocably destroys part of the physical demand. On the other hand, it leads to silver being increasingly considered an investment metal.”
Either way, the old trading rules no longer apply in light of this new Reddit phenomenon, Sayed said.
“Earnings from big technology names, the Federal Reserve’s monetary policy meeting, Covid incentive aid, economic data and vaccine deployment were supposed to be the biggest factors moving markets in the past week. Instead, it was the battle between retail investors and hedge funds that have burst out of nowhere who have taken control of the market, ”he pointed out.
Disclaimer: The views expressed in this article are those of the author and may not reflect the views expressed Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, not Kitco Metals Inc. or the author cannot guarantee such accuracy. This article is for informational purposes only. It is not a request to trade in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article does not accept the blame for losses and / or damages arising from the use of this publication.