SINGAPORE (Reuters) – A social media-driven buying industry raised silver to a eight-year high on Monday, but the concentration cooled in doubts about the ability of retailers who typically focus on stocks to move the prices in larger commodities and liquid market.
Video game retailer GameStop, at the center of last week’s “Reddit Rally,” fell 30.8% to $ 225, but other stocks caught in the frenzy that has plagued short sellers extended its lead, including BlackBerry.
Silver prices climbed to an eight-year high of just over $ 30 an ounce before stopping gains to trade 6.3% to $ 28.70.
A lot of people who envisioned a GameStop-like rally in silver “now realize there’s not as much buying pressure pushing it up as some had thought,” said Michael Matousek, chief trader at US Global Investors.
It was unclear how long the concentration fueled by Reddit would last in shares reduced by hedge funds. This week could mean more losses in the overall market if the funds have to continue selling to meet repayments or rectify their portfolios. In the longer term, they may need to change strategies.
Stock prices rose sharply last week when small business traders, who organized in online forums and traded with no-commission brokers, such as online brokerage Robinhood, placed several powerful hedge funds. with losses in their short positions.
The effect of the fight on the broader U.S. market slowed Monday, with stocks ending sharply after last week’s strong market sales. AMC was flat, having risen more than 500% this year. BlackBerry shares were higher in the New York and Toronto trading.
The confrontation has been controlled by financial regulators, lawmakers and the White House, 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, citing people familiar with the matter.
Robinhood raised another $ 2.4 billion from shareholders just days after existing investors amassed $ 1 billion, it said in a blog post. The company, which faced anger last week to curb the purchase of some shares, raised trade limits on GameStop, AMC, Koss Corp and Express.
The firm is preparing for a first public offering, but it was unclear whether it will move forward with those plans.
Cold water
Traders and analysts poured cold water on the chances of a prolonged silver rally, saying that unlike GameStop, there is no excessive short positioning and that the options market is quite balanced.
Speculative financial investors were already positioned quite bullishly, dealers said. Net long positions in futures and options COMEX Silver rose to approximately 44,320 lots on Jan. 26, according to data from the U.S. Commodity Futures Trading Commission (CFTC).
“Unlike individual stocks, the silver market is much larger and more complex and therefore more difficult to manipulate,” Raffi Boyadjian, XM’s senior investment analyst, said in a note.
Traders were increasingly concerned that the Reddit effect could spread to less liquid commodity markets. However, traders said commodity-traded funds that focus on commodities were more likely to be targeted.
The iShares Silver Trust ETF, the largest ETF with silver support, jumped 7.1% on Monday. The data showed that its holdings increased by a record 37 million shares from Thursday to Friday alone, each representing an ounce of silver.
Major mining monitors BHP Group, Glencore and Anglo American were the top six winners of the FTSE 100 in London. Miner Fresnillo rose 8.95%, and small-cap American miners Hecla Mining and Coeur Mining rose 28.3% and 23.1%, respectively.
Natural gas rose about 10% on Monday, in part due to expectations of colder weather, although those moves are not out of the norm for this market.
Retail investors at the popular Reddit online forum WallStreetBets on Monday expressed concern that betting on silver was underestimating the focus.
“By buying silver … you will be putting money directly into the pockets of EXACT HEDGE FUNDS ON THE OTHER SIDE OF $ GME,” wrote 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.”
GameStop’s short-term shares cost hedge funds totaling $ 12.5 billion during January, data from financial analysis firm Ortex showed on Monday.
Hurt short sellers
The silver rage began Thursday after WallStreetBets posts urged investors to buy physical silver.
“Go out and buy at least 4 ounces of silver as soon as you can,” a forum participant posted.
Retailers poured a record $ 40 million ($ 30.6 million) into the physical silver fund of the Australian Securities ETF in the afternoon. A silver ETF in Japan rose 11%.
The short-term global interest in silver, or the cumulative value of the bets in which it falls in price, is equivalent to approximately 900 million ounces, just below annual world production.
Banks and brokers keep most of that, but it’s unclear if they have a net value on the metal or if their bets offset the very large physical stakes.
JPMorgan analysts said the fundamentals did not justify a sustained decoupling of gold silver. Gold prices rose less than 1% on Monday.
(Reports by Tom Westbrook and Thyagaraju Adinarayan in London and Jeff Lewis in Toronto; Additional reports 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 Teixeira in New York; Written by Sonya Hepinstall; Edited by Jan Harvey and Matthew Lewis)
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