Last month, the silver market was the flashpoint in the Reddit mania. The silver price surged as much as 13%, reaching eight years high. A week prior, posts on the WallStreetBets group on Reddit called to bet on silver. This was a way to hurt the big banks as they believe they are artificially suppressing prices.
From there, the retail sites have already warned their customers that they could not meet the extremely high demands for silver bars and coins. The silver markets are currently monitored by the Commodity Futures Trading Commission. They said that they are remaining vigilant in checking these markets for potential fraud and manipulation.
APMEX, a known online retailer of precious metals, wrote that due to the demand for physical silver products, they are unable to accept additional orders until the global markets open.
SD Bullion and Money Metals posted similar notices.
UK’s royal mint shared that the demand for silver products increased by 14 times over that weekend.
The #silversqueeze was trending on Twitter as well.
If a supply squeeze happens, it could have real-world implications since silver has many industrial usages. This includes solar appliances.
What r/WallStreetBets Say
In recent trading, silver futures were up about 9%. Shares of Pan Am Silver went to 11%, and the Coeur Mining rallied more than 20%. This could prove the power of WallStreetBets. They sent AMC and GameStop to skyrocket as well. It resulted in crushing a few hedge funds that had bet against those stocks.
Meanwhile, the free-trading app Robinhood was criticized for restricting trades in GameStop.
One WallStreetBets user wrote last week that SLV would destroy the biggest banks. While another shared that JPMorgan Chase suppresses metals for quite some time.
Others are saying that JPMorgan paid a $920 million fine last year as they need to settle charges brought by manipulating trades of futures tied to precious metals.
The Winklevoss twins, who are famous for suing Facebook’s Mark Zuckerberg, also tweeted their support for WallStreetBets into silver. Cameron Winklevoss tweeted that if the silver market is proven to be fraudulent, then we must believe that the gold market will be the next.
However, a few posts on WallStreetBets suggested that hedge funds were co-opting their movement and that there was no coordinated effort when it comes to the silver market.
Senator Elizabeth Warren called for the SEC to investigate. She said that they don’t know who the players are in all of this or whether there’s big money on both sides.
Experts Weigh In
Ryan Fitzmaurice, a strategist at Rabobank, said that it is not surprising to see that the consumer demand overwhelms the physical supply of silver coins by dealers in the short term. He then added that he is not certain how the Reddit trading strategy will work in the future.
It’s worth noting that many Reddit users are saying that they should keep targeting GameStop shares. One argued that if you buy silver or going long on silver, you are directly putting your money into the pockets of hedge funds on the other side of GME. It was insisted that if you need an alternative investment to GME, better get in on the AMC, Blackberry, and Nokia.
A personal finance campaigner, Myron Jobson, said that many investment portfolios would benefit from silver and gold exposure as it can enhance portfolio diversification. But he added that it’s only for a satellite holding.
Meanwhile, Richard Hunter said that the army of keyboard warriors and those who follow their lead could get hit by their own shrapnel. This indicates that we must all be cautious in following market trends and that we have to be smart in making decisions.
We must also remember what happened with the Hunt Brothers back in the 80s. They tried to buy as much silver with high hopes of protecting their wealth from inflation. However, when industrial buyers of the precious metal complained about the silver price, regulators stepped in. This resulted in the silver price going down, and the business of Hunt Brothers collapsed.
But if there is one thing that is certain, Goldman analysts said the event with silver prices represents that populism is still a growing political force. And now, it has the power to move markets.
