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(Kitco News) The silver market is on the move and it’s not just about price. Investors are accumulating in physical, ETF and mining.
Last week, the silver movement began with the Reddit post, which culminated Monday with prices rising to eight-year highs of $ 30.35 an ounce.
“After successful attacks on short sellers against GameStop game retailer and other very short stocks like AMC, Nokia, Blackberry and Bed Bath & Beyond, the next target for retailers has become silver,” he said. say Hussein Sayed, FXTM market strategist.
On Friday, the iShare Silver Trust (SLV), which is the largest exchange-traded fund (ETF) in the world, posted a one-day entry of nearly $ 1 billion. And it’s likely to come a lot longer on Monday as more traders choose to participate, Sayed noted.
Silver miners also saw an impressive rally on Friday and Monday as investors watched the silver mining sector.
In light of this rise in prices, silver is no longer cheap from a fundamental perspective, said Commerzbank analyst Eugen Weinberg.
“Having been below $ 25 per troy ounce for much of Thursday, the price of silver this morning has risen more than 10% to a good $ 30. The price explosion has seen as the much-considered gold / silver ratio drops to just 63, ”Weinberg said Monday.
Analysts warn investors to be careful in this kind of frenzy, as silver market shorts are a different beast from GameStop, which Reddit encouraged earlier.
“Wall Street targeting may be out of place as most large banks hold short positions in the silver futures markets to hedge their physical holdings. If their short positions lose value, their physical holdings gain, for both from a price perspective are neutral. ” said Sayed.
In addition, much more effort is needed to have a strong and lasting impact on the price of silver versus single equity.
“Silver’s market cap ranges from $ 1.4 billion to $ 1.6 billion compared to GameStop’s $ 1.5 billion before becoming the target of retail investors, and a large proportion of the market is out bag, ”Sayed added.
It remains to be seen to what extent retail investors can take silver. “Retailers who have just followed the flock and join the party late can accumulate huge losses and need to be more rational in their decisions. The new phenomenon may continue for some time, but the longer it lasts, more prices will occur on assets and possibly lead to great damage to the wider market, ”Sayed noted.
Weinberg wrote that an excessive rise in prices could be detrimental to the silver market in the medium term. “It irrevocably destroys some of the physical demand. On the other hand, it turns out that silver is increasingly seen as an investment metal.”
Either way, the old commercial rules no longer apply in light of this new Reddit phenomenon, Sayed said.
“The gains of big tech names, the Federal Reserve’s monetary policy meeting, Covid stimulus aid, economic data and vaccine deployment should be the big factors that moved markets last week. Instead, it was the battle between retail investors and hedge funds that erupted out of nowhere that took control of the markets, ”he noted.
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