Silver miners soar as Reddit traders pile into the precious metal

Silver miners soar as Reddit traders pile into the precious metal”

Exchange traded funds are the easiest way for retail investors who tend not to have access to futures and interbank markets to generate unlimited immediate demand for silver.

Silver prices are up 15 per cent since Wednesday's close, around when messages began circulating on forums such as Reddit encouraging users to buy the metal and drive up prices.

Investors can also buy from retailers of bars and coins, but these are relatively small compared to the wholesale market and stock is limited.

Even if Reddit does target silver, it's not clear the online community can have the same effect on precious metals as it did with individual stocks.

The world's largest silver-backed exchange-traded fund, the iShares Silver Trust, recorded nearly $1bn in inflows on Friday, according to data from BlackRock, the fund's sponsor.

Around $6bn worth of silver traded hands in the silver market in November, according to the latest statistics from the London Bullion Market Association.

More news: Ontario reports 1,848 new COVID cases Sunday

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, data from BlackRock show. In 1979-80 the brothers William, Nelson and Lamar Hunt amassed billions of dollars' worth of the metal, pushing prices to record levels before regulators stepped in and the market collapsed. Unlike GameStop, there are no holders of massive silver short positions who can be forced to abandon them in big enough numbers to send prices though the roof.

The news of silver jumping had some members of the WallStreetBets forum celebrating, while others said the move was benefitting too many institutional names.

"When you have a circumstance where certain market participants are intentionally trying to distort those signals that is something that gives us cause for concern", he said.

Dr Elvis Jarnecic, senior lecturer at the University of Sydney Business School, said silver was a "much much more liquid market with a lot more buyers and sellers" so that the newly empowered investors will represent much less significant percentage of traders.

In 1998, Warren Buffett's Berkshire Hathaway drove silver prices up 90 per cent to a 10-year high after he quietly accumulated a huge position in the silver market.

In South Korea, where retail traders dubbed "ants" have turbocharged a long equities rally by investing borrowed money are applying pressure to quash a government plan to lift a pandemic-imposed short-selling ban.

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