Monday, February 01, 2021

Wall Street: Silver jumps as retail investors pile in (Updated)

The same crowd that drove up GameStop stock by 1600% while inflicting huge losses on several hedge funds in a coordinated short squeeze have turned their attention to the silver market. Silver has long been the subject of conspiracy theories about mysterious but powerful entities short selling it. The metal was up more than 10% in overnight trading.

Silver is both an industrial and precious metal and its movements can be hard to predict. But unlike GME it is not a stock and the market for silver is huge with multiple avenues for investors to gain exposure. These include stock in silver miners, the bullion backed ETF SLV, physical bullion that can be purchased in bulk on the COMEX or in smaller quantities from local coin shops and online bullion dealers. Also unlike GME, most Wall Street analysts have been bullish on silver (and gold) for a while and silver was already at multi-year highs before the arrival of the #silversqueeze crowd. 

It will be interesting to see where this goes. But one indicator is that I checked my two favorite online bullion dealers this morning to see what they had in stock and what they were charging in premiums (the mark up above spot price for retail oriented bullion). Both of them look like the toilet paper aisle at Walmart did last March. They have been almost completely wiped out of their silver inventory and the little that's left is being sold at extortionist premiums. I would be careful about reading too much into that though. Only a small percentage of silver is refined/minted with ordinary investors in mind so whenever precious metals spike there is often a near term shortage in the small bars and rounds popular with retail investors or collectors. 

Disclosure: I have had a smallish position in silver for several years and do not have any plans to add to or sell any of it in the immediate future. But if the price goes nuts... 

Update: No surprise. The rally fizzled as silver has given up almost all of its gains. And in related news GameStop is also falling like a rock as the short squeeze ends and people realize they were paying hundreds of dollars for a company whose stock is probably worth no more than $25 a share in fair market valuation. A few people made a ton of money. but a lot of the folks late to that trade and those who didn't realize that it was already over, are getting hosed. They can join the hedge fund guys in licking their wounds. 

Wall Street is a rough neighborhood. 

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