Many hold a grudge against Wall Street, due to its role in the 2008 financial crisis, and are eager to beat the professional investors at their own game. This was revealed in an emotional open letter(Link), which described one trader’s childhood experiences during those rough years and helped galvanize the group. That translates into global silver ETF holdings now in the 1 billion ounce range. The Global X Silver Miners ETF (SIL) went from $40 to $49 in just three days. The ETFMG Prime Junior Silver Miners ETF (SILJ) went from $13.60 to $17.80 in that same time. In the recent #silversqueeze hype, silver traded at an 8-year high, as demand was exploding.
All of these factors are beneficial for the price of silver, regardless of investment demand. Silver is different in many ways from individual stocks like GameStop, AMC, Blackberry and many more. For instance, having a short squeeze in silver could be difficult because it’s a much deeper and more highly liquid market. For instance, GameStop’s market cap was $1.4 billion in mid-January, but this increased 16 times over when Reddit traders started to talk up the stock. If we look at the quantity of silver stored in London vaults, it is nearly 1.08 billion ounces of silver, according to the LBMA data released back in November 2020. This puts the silver valuation stored in these vaults to almost $32 billion.
- The idea behind the “silver squeeze” thesis is that big banks and hedge funds currently have massive short positions in the silver market for the purpose of suppressing the price of the precious metal.
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- Silver crossed above the $30 mark earlier today, and silver ETFs experienced a massive inflow on Friday.
Does this necessarily mean a massive conspiracy is taking place? After all, many of those “short” on silver are the same ones who produce the metal for retail use. What most people don’t realize is that a similar “raid” already took place in history. During the inflationary period in the 1970s, William Hunt, Lamar Hunt and Nelson Hunt set out to corner the market on silver. They purchased both physical assets and paper silver (e.g. futures contracts). Because of these decreases, many people called it history’s “greatest theft in the silver market.” The raid that found its roots in WallStreetSilver intended to push back against price manipulation.
Will Wall Street Silver Short Squeeze Succeed?
They believe that silver is a highly undervalued asset and that its price is destined to rise. Since 2016, silver mine production has been on a steady decline, while industrial demand has been constant. President Biden has promised to invest 1.7 trillion dollars to fight climate change, an initiative that will involve a transition to renewable energy sources such as solar panels. Since a solar panel requires a certain portion of silver for its manufacture, we can only expect industrial demand to increase in the future. Another source of demand which is on the rise is electric vehicles, which require much more silver to produce than traditional internal-combustion-engine vehicles. If the great success of Tesla Motors is any indicator of things to come, the transportation sector will surely need more silver.
However, the supposed silver squeeze and the one that followed have been rather ineffective when compared to short squeezes on Gamestop (GME) and the like. This article takes a look at the events surrounding the silver squeeze and some of the difficulties of shorting the silver market. As this happens, it’s easy to foresee a significant increase in the price of silver. Many Wall Street insiders even bet that this will take place in the near future.
Silver Squeeze 2.0 and Wall Street Silver, Explained
If silver can push above $30 on strong volume, the odds of an even more extensive bullish move will increase. Making investment choices is a personal decision, but it’s hard to overlook what’s happened in recent months. There’s definitely an impending silver shortage coming, and when combined with issues such as government reserves and industrial needs, enormous increases in the price of silver could be on the way.
Basel III could accelerate the efforts of Wall Street Silver, the Reddit group behind the Silver Squeeze. The Silver Squeeze is a concerted effort by these investors to stop the big bullion banks’ silver market manipulation. By taking delivery on silver futures and purchasing large quantities of physical silver.
For now, I am watching and waiting to see if silver can close decisively above $30. I’ve been very optimistic about the outlook for safe-haven assets like gold and silver. Because I had been correctly expecting a serious economic crisis, I have favored safe-haven assets over risk assets such as stocks and real estate. I still believe that these safe-havens will thrive in the years to come as central banks continue to flood the world with liquidity in an attempt to prop-up the debt-ridden global economy. The monthly silver chart shows the $22 to $30 trading range along with other likely resistance levels at $35, $45, and $50 that formed at prior peaks in 2011 and 2012. If silver can close above $30 in a convincing manner, the next price target to watch is $35 and so on.
Inflation: The Final Catalyst to Real Gold and Silver Prices
But it’s still up 20% since late November and has gained 125% since its March lows. You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. The content of this article was relevant https://www.dowjonesrisk.com/ at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article. As such, this has led some to pursue the idea that this may have been a diversion ploy, orchestrated by actual ‘Wall Street’ to derail the momentum and cohesiveness of the online trading community.
They believe that by buying and holding GameStop, they can force the price higher, and force GameStop short-sellers to buy back the shares at ever-higher prices. As of 1 February 2021, the price of the precious metal has hit a seven-year high at $29.40 (£21.48) per ounce. Silver suppliers started seeing an increase in orders before February, but on February 2nd, something big happened. People began buying silver and pouring money into SLV (iShares Silver Trust).
Right now, the epicenter of this activity is a community called “WallStreetBets’, on the Reddit social network. But the idea is spreading rapidly, and new discussion groups are emerging as we speak. I believe that chart analysis is a tool that is helpful for determining if a large move is likely ahead in the silver market. After all, this type of analysis helped me spot Bitcoin’s recent run-up ahead of time. Right now, silver futures are trading in a range between the $22 support level and the $30 resistance level that formed at the peak in early-August.
The candlestick chart below highlights the gap up in the price of the fund with an almost immediate retracement bringing prices back to where they were before the massive inflows. The surge in volume is circled in red, while the average true range (ATR) indicator – which depicts an average of daily price movement – also peaked. Thereafter, the WallStreetBets community decided to turn their sites towards the silver market in an attempt to raise the price of a market that has long been rumored to be intentionally suppressing prices. Its goal is to closely mimic the performance of the price of silver. „Shares of the Trust are not subject to the same regulatory requirements as mutual funds,“ according to the iShares site.
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There’s a thought among those in the community that market manipulation has purposefully kept the price of silver down. And while this may seem like an over-the-top claim, it’s hard to deny the facts of what happened on what has become known as the “Silver Raid Day” in February 2021. The superimposed orange line depicts the price of the continuous silver futures contract, which witnessed a spike but failed to raise prices significantly, as was expected.