THE rally in the silver price, thought to have been brought about by retail traders, lost momentum with analysts telling Bloomberg News it might be more difficult to direct an exchange-traded commodity than a single stock.
Reddit’s WallStreetBets grabbed global attention last week after armchair investors aggressively bought shares in GameStop Corporation forcing institutions to liquidate their short positions in the stock.
The market thought the same might be coming for the silver market after the metal leaped to an eight-year high – about $30 per ounce – before it dipped back down to $29/oz. In addition to buying exchange-traded funds, investors also bought silver coins as well as commemorative bars.
Silver’s retracement “isn’t surprising, as any longer-term price upside due to social media-driven collaboration and conspiracy theories was always going to be unsustainable,” Gavin Wendt, a senior resource analyst at MineLife, told Bloomberg News. “There is a big difference however between trying to manipulate trading in an equity compared to a major exchange-traded commodity.”
“Fundamentally I don’t believe that there are any significant short positions in the silver market, as the outlook for silver is robust this year, coming off a strong performance in 2020,” said Wendt.
Carlo Alberto De Casa at derivatives broker Activtrades said in an article by the UK’s Guardian newspaper: “History tells us that in the majority of cases these things finish with a bloodbath. As long as the market is going up so quickly, it can do exactly the same in the opposite direction.”
The silver market has long been at the centre of conspiracy theories suggesting prices are being depressed – although data shows money managers, in fact, have a net long position in the metal, meaning they will overall do better if prices go up, the newspaper said.
