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Silver price hits five-month high as retail traders pile in – business live

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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 spot price of silver is soaring today, up over 7% to $29 per ounce, its highest level since last August. Some retail investors mobilized over social media are piling in the precious metal, with one Reddit post on WallStreetBets arguing that ‘The biggest short squeeze in the world’ is on.

jeroen blokland
(@jsblokland)

#Silver starts week 7% higher.#silversqueeze pic.twitter.com/SZec9fEkxP


February 1, 2021

The move began late last week, with a surge of money into the iShares Silver Trust, an exchange traded fund which is backed by physical silver and tracks its price.

Michael Goodwell
(@MichaelGoodwell)

Wow.

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


February 1, 2021

Retail sites are also reporting a surge in demand for silver bars and coins on Sunday, indicating a scramble to get hold of physical silver assets.

Kyle Rodda of brokerage IG explains:


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.

But squeezing the silver market will be much harder than moving a single company’s stock price.

And other WallStreetBets users are urging against piling into silver, with one post claiming it’s an attempt by hedge funds to distract from the GameStop squeeze.

Jeffrey Halley, Senior Market Analyst at Asia Pacific, OANDA, says retail investors should be careful when targeting silver.


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.

Last week, the US stock market had its worst week in three months, with the attack on short selling in recent days leaving some large stablished funds nursing huge losses.

Melvin Capital, one of the hedge funds which bet against GameStop, lost more than 50% in January according to the Wall Street Journal.

This is forcing hedge funds and other major investors to cut their short positions in stocks identified by the Reddit reader/trader community. But they’re also closing their long holdings in stocks, to keep their portfolios balanced. This ‘de-grossing’ was a factor behind last week’s volatility.

Adam Samson
(@adamsamson)

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.’


January 31, 2021

Adam Samson
(@adamsamson)

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


January 31, 2021

Investors are also more anxious about the fight against the pandemic, given the deepening row between the European Union and AstraZeneca over vaccine supplies.

Yesterday, France and Germany raised the threat of legal action over the supply problems which mean the EU will only get 25% of the 100m doses pledged to the bloc by the end of March.

But despite that, European markets are on track for a positive open.

IGSquawk
(@IGSquawk)

European Opening Calls:#FTSE 6424 +0.26%#DAX 13543 +0.82%#CAC 5440 +0.75%#AEX 642 +0.71%#MIB 21724 +0.70%#IBEX 7813 +0.71%#OMX 1957 +0.41%#STOXX 3511 +0.84%#IGOpeningCall


February 1, 2021

Also coming up today, a flurry of purchasing manager surveys will show how factories across the world fared in January.

The UK data is expected to confirm there was a sharp slowdown last month, with supply delays, rising costs and weak exports due to the pandemic and the end of the Brexit withdrawal agreement.

The picture in Australia is more encouraging, with the manufacturing PMI strengthening last month:

Shane Oliver
(@ShaneOliverAMP)

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


January 31, 2021

The agenda

  • 9am GMT: Eurozone manufacturing PMI report for January
  • 9.30am GMT: UK manufacturing PMI report for January
  • 9.30am GMT: UK mortgage approvals and lending data for December
  • 10am GMT: Eurozone unemployment rate for December
  • 3pm GMT: US manufacturing PMI report for January

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