Silver price hits five-month high as retail traders pile in – business live
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Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, says a ‘mass move’ of retail investors have piled into silver, sending its price rocketing today.
On Sunday, silver coins and bars were taken by assault; outlets were unable to process orders until markets opened in Asia. Silver jumpstarted the week hitting $29 an ounce, as pajama traders piled into the metal they considered undervalued in a mass move.
This time, the move didn’t come as a pure surprise, as last week’s rush to iShares Silver Trust has thrown the foundation of what we saw on Sunday. From a pricing perspective, we had already discussed the fact that silver lagged behind gold amid an impressive flight to safety sent the yellow metal to its all-time highs last year. Empirical data shows that the gold-silver ratio stands near 60 on average, and the price of an ounce of silver could have well consolidated within the $30-32 band given that the gold price held ground near $1800 per ounce.
For silver though, the rally could be short-lived as some leading members of Reddit wallstreetbets platform are already divided over the question, and advise against the move in silver.
One important thing to remember in this game is, if you lose full support, and momentum, it’s over. This is why, the speculative rush is a prosperous, but a dangerous game.
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Having blasted GameSpot’s shares dramatically higher in the last week, some of the new wave of retail traders shaking up Wall Street have another target -- silver.
The 37.05m increase in the number of shares of the iShares Silver Trust on Friday was the biggest one-day increase since the ETF started trading in April 2006. pic.twitter.com/lTC2oxYsuL
Like the GameStop situation, there’s a back-story to the attempted pumping over silver prices: angered by the perception of a manipulated market for paper silver, the traders are looking squeeze the shorts on the silver market, and force correction in price that, so the argument goes, better reflects the supply and demand of the underlying commodity.
With a large physical off-exchange market, and a lot more liquidity theoretically, then the sparely traded stocks dallied with so far, the retail wolf pack is in dangerous waters.
The wolves of Wall Street may well be luring them into a trap in their Bunker Hunt for Reddit October.
Interesting from Goldman re the WSB risk: ‘In recent years elevated crowding, low turnover, and high concentration have been consistent patterns, boosting the risk that one fund’s unwind could snowball through the market.’
This too: last week ‘represented the largest active hedge fund de-grossing since February 2009 ... despite this active deleveraging , hedge fund net and gross exposures on a mark-to-market basis both remain close to the highest levels on record’ pic.twitter.com/wUtAuuc5pK
Aust Jan manufacturing PMI +3.2pts to a strong 55.3, similar to Markit PMI at 57.2.
Gains were broad based.
(Goldman Sachs chart) pic.twitter.com/eJTHM36mcY