Spot and futures silver prices jumped 11% on Monday morning in London, as retail investors extended their enthusiastic buying from the metal to mining stocks and online dealers.
- Silver-related prices had risen in the last trading sessions, fueled by Reddit posts, YouTube videos and other social media discussions suggesting a type of investing similar to the one that led to the pile-on into videogames retailer GameStop last week.
- Online posts suggested last week that higher silver prices might hurt banks and brokers with large short positions, and that a “squeeze” similar to last week’s GameStop play might be possible.
- The silver frenzy led U.S. retail dealers of the physical metal to suspend operations over the weekend after being unable to service customers, according to Bloomberg.
- The iShares Silver Trust, the world’s largest silver-backed exchange-traded fund, received more than $1 billion of inflows on Friday. It is backed by physical silver in its vaults, which it must acquire when investments in the fund increase.
The outlook: A GameStop
repeat may not be the most plausible scenario. The size of the world silver market doesn’t compare to the tiny GameStop market capitalization, and most banks shorting silver do so to hedge their physical ownership of the metal — not because they bet on falling prices.