Silver spikes as small investors take on Wall Street in metals market

The Reddit-driven buying frenzy has spilled over into commodities, and the silver market in particular, pushing futures contracts for the precious metal to a five-month high.

Silver futures for March delivery gained around 12 percent, trading at around $30 an ounce on Monday morning. The spike follows unprecedented demand for silver bars and coins recorded over the weekend which forced some dealers to stop taking orders or warn customers about shipping delays.

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Retail investors have started piling into physical assets since the end of last week, inspired by fellow users on the Reddit forum r/WallStreetBets. After Reddit posters united to beat big hedge funds at their own game, buying up shares of companies that the funds were betting against, some of them pointed to “one of the most manipulated markets in the world” – the silver bullion market. One post that has already been removed from the thread urged investors to use the same strategy as they did with GameStop and other shares – short squeeze silver, possibly to $1,000.  

The strategy boosted not only the silver price, but had an impact on the entire silver-related industry. Shares of silver miners rallied at the end of last week. Silver’s largest exchange-traded product, iShares Silver Trust, saw huge inflows as it became one of the main instruments to invest in the commodity. The fund gained around five percent in the week and recorded an unprecedented $944 million net inflow on Friday.

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The hashtag #silversqueeze has also been trending on Twitter, possibly attracting even more attention to the precious metal. However, some analysts say that commodities differ from GameStop and other stocks earmarked by Reddit users, and it could be harder to squeeze the much bigger and more liquid silver market.

While it is unclear if retail investor interest in silver will persist, some people on the r/WallStreetBets subreddit warned that silver is no use in the battle against Wall Street sharks. Some advised against the silver squeeze, saying that hedge funds are actually long on the metal and by buying it now “you would be directly putting money into the pockets” of the funds.

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