Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Silver Sinks as Investor Frenzy Cools and Reddit Backlash Grows

Commodities Feb 02, 2021 13:00
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters.

(Bloomberg) -- The buying frenzy that sent silver to an eight-year high is showing signs of stalling.

Silver in London and New York dropped more than 5% after CME Group (NASDAQ:CME) hiked margin requirements for futures, while a backlash against the precious metal gained momentum among posters on the now-famous Reddit board that kicked off turmoil in the market last week.

Backwardation -- a sign of tightness -- is easing in the futures market, and at least one European coin dealer said demand was getting back to normal after a buying surge that overwhelmed retail websites across the globe over the weekend. Analysts from HSBC to Commerzbank had warned the rally would be hard to sustain.

Read more: Reddit Trades Crumble as GameStop, AMC and Silver Plunge

“The rush in silver was the perfect moment to take profit,” said Georgette Boele, an analyst at ABN Amro Bank NV. Investors will liquidate their positions when “they realize that prices can’t be pushed higher.”

The silver market was roiled in the past week after a series of posts on the WallStreetBets forum calling for a “short squeeze.” BlackRock’s iShares Silver Trust (NYSE:SLV) had a combined net inflow of $1.5 billion on Friday and Monday, silver options trading surged and prices swung dramatically before spiking to the highest since 2013. Silver miners were caught up too, with Canada’s First Majestic Silver Corp.  (NYSE:AG) rising as much as 43% yesterday.

As prices pull back, it remains unclear who authored the posts that ignited the huge run-up, or who exactly was behind the trading. Money managers have had a net-long position on the metal since mid-2019, making it unlikely that retail investors could accomplish the kind of result they’ve produced so dramatically in stocks like GameStop Corp (NYSE:GME).

“In the current environment, a coordinated surge in investment by retail traders into the silver market would simply raise volatility and generate small regional dislocations in supply-demand dynamics,” Goldman Sachs Group. analysts including Jeffrey Currie wrote in a note. “While the silver market will likely survive this intense focus, what this event does represent is that populism is still a growing political force, now with the power to move markets.”

On the WallStreetBets board, sentiment has turned decidedly against silver. Users are speculating supporting posts may be part of a pump-and-dump scheme -- or that hedge funds may have infiltrated the board.

In the physical-silver trade, dealers presented a mixed picture. In Singapore, orders remain high and U.S. Mint American Silver Eagle 1-ounce coins are commanding a premium of 46%, more than double a week ago, said Ronan Manly, a precious metals analyst at Singapore dealer BullionStar.

But in Switzerland, “it looks like interest is getting back to normal,” said Alessandro Soldati, chief executive officer of dealer Gold Avenue, although he said premiums remain high. “Yesterday was a really hectic day.”

Spot silver dropped 5% to $27.5980 an ounce at 11:39 a.m. in London. Gold and platinum also fell, while palladium rose. The Bloomberg Dollar Spot Index was little changed.

“Silver is ripe for a correction as the retail frenzied buying begins to fade,” said Ole Hansen, head of commodities research at Saxo Bank A/S. “Infighting on Reddit also highlights the fact that the biggest winners from the recent surge are hedge funds many of which have been long for month.”

©2021 Bloomberg L.P.


Silver Sinks as Investor Frenzy Cools and Reddit Backlash Grows

Related Articles

Crude Oil Edges Higher; G7 Meeting in Focus
Crude Oil Edges Higher; G7 Meeting in Focus By - Jun 27, 2022

By Peter Nurse -- Oil prices edged higher Monday as traders look to the ongoing G7 meeting for further moves to limit the funding Russia gets from its oil...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
Sign up with Email