Silver prices jump to eight-year highs as Reddit traders’ pile in

Reddit traders send silver price to eight-year highs: Precious metal soars 12% as renegade investors pile in to put squeeze on short-sellers

  • Reddit thread r/wallstreetbets had mentions of the hashtag #silversqueeze 
  • Spot silver up 12% to $30.17 an ounce – the highest since early 2013 
  • Shares in precious metal miner Fresnillo almost 20% higher 

Silver prices jumped to eight-year highs this morning after the Reddit brigade of traders that targeted Gamestop turned their attention to the precious metal.

The Reddit thread r/wallstreetbets had multiple mentions of the hashtag #silversqueeze, where users encouraged each other to buy silver, sending the metal price soaring.  

Spot silver has risen 12 per cent to $30.17 an ounce, an increase of almost 20 per cent over the last five days and the highest price since early 2013.   

Silver lining? The precious metal price has jumped after being targeted by Reddit traders

The frenzied activity in the precious metal is the latest of an online movement by retail traders to push up values of assets that big fund managers had bet against.    

‘You can understand why silver is attracting the attentions of the social media traders who are looking to vent their fury upon, and profit from, short sellers,’ says Russ Mould at AJ Bell.

‘Allegations about, and fines for, investment banks rigging precious metal markets have abounded for some time. 

‘More fundamentally, money supply is surging, markets more generally are watching carefully for any signs of inflation and precious metals are traditionally seen as a potential hedge here.’ 

Traders piled in silver by buying shares in silver mining companies as well as exchange-traded funds (ETFs) backed by physical silver bars, in a GameStop-style short-squeeze.

Shares in Fresnillo – a precious metal mining FTSE 100 company – were up over 18 per cent to £11.69 in morning trading on Monday. 

Meanwhile, data from iShares Silver Trust ETF on Friday showed over 37million shares were created in one day, each one representing an ounce of silver.

Buying an ETF can boost silver prices by increasing the number of shares in the fund and making its operator buy more metal to back them.

But analysts have warned that it may prove much harder for small investors to squeeze short sellers as the market is much deeper and more liquid.

Neil Wilson at Markerts.com said: ‘We should also note that some bigger smart money may have be front-running this trade to piggyback the rally and further fuelling the move up. (George Soros: “When I see a bubble forming, I rush in to buy, adding fuel to the fire.”)’

And added: ‘Targeting physically backed ETFs like SLV may be smart, as it will drive physical demand and push up spot prices perhaps more acutely than just by trading futures. I would reiterate that this kind of herding to coordinate a squeeze up is risky and likely to create a bubble that will hurt more than helps on the way down.’ 

Analysts have cautioned that the latest frenzy could end up in tears for many investors as it also happened in the 1980s with the Hunt brothers. 

The Hunt brothers – Nelson Bunker, Lamar and William Herbert – tried to buy up as much silver as they could in 1980 in an attempt to protect their wealth from inflation.

They managed to control a third of the freely available supply, excluding that which resided in government or central bank vaults, according to some estimates.  

However, industrial buyers of silver complained about the increase in their raw material costs and regulators stepped in to limit how much silver could be bought on margin or using borrowed cash.

The move sent the price of silver plunging and the rich Hunt brothers eventually saw their business empire collapse under the weight of its losses on silver.