THE price of silver soared to its highest level in eight years as day-traders on Reddit targeted the precious metal.
Silver was up by around nine per cent at about $29.40 an ounce, having risen above the $30 mark for the first time since 2013.
The urge in silver’s price followed a rise in interest in the commodity on Reddit’s WallStreetBets forum, which had previously fuelled the stock prices of companies like GameStop and AMC Entertainment.
The popular message board had come into conflict with hedge fund managers after betting against those businesses.
Now amateur traders appear to want to exert pressure of a “short squeeze” in silver in order to pressure banks who have bet on its price falling.
“Silver Bullion Market is one of the most manipulated on earth,” Reddit user RocketBoomGo wrote in a popular post outlining the thesis. “Any short squeeze in silver paper shorts would be EPIC.”
“If you don’t care about the gains, think about the banks like JP MORGAN you’d be destroying along the way,” the poster added.
The “#SilverSqueeze” movement has gained support from Tyler and Cameron Winklevoss, the venture capitalists who famously sued Facebook founder Mark Zuckerberg and currently run a cryptocurrency exchange.
“The #silversqueeze is a rage against the machine,” Tyler Winklevoss said on Twitter Sunday.
Not everyone using the WallStreetBets board, which has 7.8million members, accepted the squeeze on silver with many believing hedge funds and the media were pushing the price rise.
“[S]top trying to make silver happen, it’s not going to happen,” a user named snacksandmetal said.
“It's a fool’s errand, it's financial anarchy; somebody is going to get hurt,” said Ross Norman, a veteran precious metals trader.
Despite statements like that, they couldn’t stop demand for silver jumping 12 times higher than normal, according to precious metals broker APMEX, who also said they had gained as many new customers on Saturday as it usually did in a week.
“We have made strategic decisions to procure additional metal, locking up any metal we can find in the market place,” CEO Ken Lewis said in a statement posted on APMEX’s website. “We suspect premiums will rise and rise quickly, as we are seeing significant increases in our costs, when we can even locate the metal.”
The iShares Silver Trust, the world’s largest silver-backed exchange traded fund, recorded nearly $1billion inflows on Friday, according to the fund’s sponsor BlackRock.
The iShares Silver Trust was among the top six most-traded equity securities among retail investors on Friday.
Last week a Reddit forum user named TheHappyHawaiian said buying shares in the exchange traded fund (ETF) would “force physical delivery of silver” into the fund’s vaults, thereby causing a “short squeeze” on the market, pushing up the silver price, according to the Financial Times.
The user wrote on the forum that it would be “incredible” to make large banks active in the futures market “pay dearly” for what he alleged were bets that the silver price will fall.
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