SINGAPORE (Reuters) – A buy-to-let drive on social media raised silver to a high of eight years on Monday, but the rally cooled over doubts about the ability of retailers usually focused on stocks to push prices into larger, more liquid commodities move. market.
Video game retailer GameStop, in the middle of last week’s ‘Reddit rally’, fell 30.8% to $ 225, but other stocks caught in the frenzy that plagued short sellers extended their advance, including BlackBerry.
Silver prices climbed to an eight-year high of just over $ 30 per ounce before trading the 6.3% gain at $ 28.70.
Many people who expected a GameStop-like rally in silver now realize that there is not as much buying pressure increasing it as some thought, “said Michael Matousek, chief trader at US Global Investors.
It was not clear how long the Reddit-powered march in hedge fund-shorted stocks would last. This could mean more losses in the broader market this week if funds have to keep selling to meet redemptions or adjust their portfolios. In the long run, they may have to shift strategies.
Share prices fluctuated wildly last week when retailers, who organized in online forums and traded with fee-free brokers such as online brokerage Robinhood, saddled several powerful hedge funds with losses on their short positions.
The effect of the battle on the broader US market waned on Monday, with equities ending sharply after last week’s strong decline. AMC was flat and has risen more than 500% this year. BlackBerry shares were higher in New York and Toronto trading.
The showdown has scrutinized financial regulators, lawmakers and the White House, which is concerned about possible market manipulation.
Robinhood chief executive Vlad Tenev is expected to testify before a U.S. House of Representatives committee on Feb. 18, Politico reported Monday, referring to people familiar with the matter.
Robinhood raised another $ 2.4 billion from shareholders a few days after existing investors pumped in $ 1 billion, according to a blog post. The company, which got angry last week for restricting the purchase of some shares, increased trading restrictions on GameStop, AMC, Koss Corp and Express.
The firm is preparing for an initial public offering, but it was not clear if it will proceed with the plans.
Cold water
Traders and analysts have poured cold water on the chances of a long rally in silver, saying, unlike in GameStop, there is no excessively short position and that the options market is fairly balanced.
Speculative financial investors have already been fairly positive, traders say. The net long positions in COMEX Silver futures and options rose from January 26 to about 44,320 lots, data from the US Commodity Futures Trading Commission (CFTC) showed.
“Unlike some stocks, the silver market is much larger and more complex and therefore more difficult to manipulate,” Raffi Boyadjian, senior investment analyst at XM, said in a note.
Traders were concerned that the Reddit effect could expand into less liquid commodity markets. Traders, however, say that exchange-traded funds that focus on commodities are more likely to be targets.
The iShares Silver Trust ETF, the largest silver-backed ETF, rose 7.1% on Monday. The data shows that the stock rose by 37 million shares from Thursday to Friday alone, each representing an ounce of silver.
Mining BHP Group, Glencore and Anglo American were the top six winners at the FTSE 100 in London. Miner Fresnillo rose 8.95%, and U.S. small-cap miners Hecla Mining and Coeur Mining rose 28.3% and 23.1%, respectively.
Natural gas rose by about 10% on Monday, partly due to expectations for colder weather, although such movements are not outside the norm for the market.
Small investors on the popular Reddit online forum WallStreetBets on Monday expressed concern that betting on silver was suppressing their focus.
“By buying silver … you would put money directly into the pockets of the PRECISE SHIFT FUND on the other side of $ GME,” writes one user who urged investors to continue buying GameStop. “It will put you on the sidelines of this just and glorious war we are in.”
The shortfall in GameStop cost hedge funds a total of $ 12.5 billion in January, data from financial analysis firm Ortex showed on Monday.
See short sellers
The silver furor started on Thursday after posts on WallStreetBets urged investors to buy physical silver.
“Get out there and buy at least 4 ounces of silver as soon as possible,” one forum participant posted.
Retailers pledged a record $ 40 million ($ 30.6 million) into the Australian ETF Securities’ Physical Silver fund by noon. A silver ETF in Japan rose 11%.
The global short-term interest in silver, or the cumulative value of bets it drops in price, is equivalent to about 900 million ounces, just less than the annual global production.
Banks and brokers hold most of it, but it is not clear whether it has a shortage of the metal and whether their bets have a very large physical possession.
JPMorgan analysts said fundamentals do not justify a continued decoupling of silver from gold. Gold prices rose by less than 1% on Monday.
(Reporting by Tom Westbrook and Thyagaraju Adinarayan in London and Jeff Lewis in Toronto; Additional reporting by Gavin Maguire in Singapore, Luoyan Liu in Shanghai and Abhinav Ramnarayan, Sujata Rao and Karin Strohecker in London, Lewis Krauskopf, Devika Krishna Kumar and Marcelo Tecel London New York; Written by Sonya Hepinstall; Edited by Jan Harvey and Matthew Lewis)
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