Silver has performed well over the past year, rising by more than 60% with the Corona pandemic and amid the weakening dollar, as the metal attracted positive comments from some of Wall Street’s largest banks.
Goldman Sachs described silver as the preferred precious metal in a research note dated Jan 27th, whose price target was $ 30 an ounce.
As silver broke more than $ 30 an ounce at the start of the February sessions, the precious metal took center stage in the retail investor frenzy sweeping the markets.
This sparked a debate about the power of speculators, inspired by the communication platform “Reddit”, to take ever bigger targets among small investors.
According to CFTC data compiled by Bloomberg, money managers’ net bets rose to their highest level in three weeks in the week ending January 26th.
However, money managers have had a long-term position in the metal since mid-2019, which is shown by futures and options data from the CFTC.
Wall Street Dispute!
The American video games and electronics company, GameStop, was seeing a weak value of its shares near $ 20, with its sales declining due to the Corona pandemic, which was planning to reduce its stores.
This prompted Wall Street whales to short-sell the companies that collapsed on the stock exchange, which is to borrow their shares, sell them at a certain price, and then buy them again as the value of the company decreases at a price lower than the price at which it was sold.
This is being done via hedge funds of major investors as the video game retailer’s market cap was around $ 1.4 billion in mid-January.
But in a dramatic shift, the war was declared by small investors on the social networking platform “Reddit” through the “wallstreetbets” forum, which led to turning the tables on whales.
There was a massive purchase of the stock by small retailers on Wall Street, so the stock rose by more than 700% in a week, leading to a 16-fold increase in the company’s value, which led whale hedge funds to lose billions.
It also appears that the first high-level retail madness target helped the silver positively with the start of this week’s sessions for investors trying to gauge the impact of volatility fueled by the “Reddit” platform on their risk models and is likely to shift from one asset to another.
But silver differs in important respects from stocks such as GameStop. On the one hand, the scope of selling pressures on silver is much less clear. In contrast, the value of silver in vaults in London alone is around $ 48 billion.
Politics of questioning the credibility of banks!
After a weekend buying bout that overwhelmed online sellers of silver and bullion coins from the US to Australia.
The comments on the “Reddit” platform alleged that banks were manipulating prices, that they were keeping them artificially low and covering the shortage of physical supplies.
And like the rush to buy GameStop stocks and other small stocks that have captivated the financial world in recent weeks.
Silver’s progress can be tracked up to the “WallStreetBets” forum of the “Reddit” platform, after a post announced last week that the metal is the largest palace in the world and encouraged traders to build confidence in “iShares” as a way to affix it to major banks.
This boosted the shares of “iShares Silver Trust” of BlackRock, the largest traded product in the exchange to track the metal, an unprecedented net flow of $ 944 million on Friday.
Retailers boost silver prices!
Silver rose more than 10% to exceed $ 29.8 an ounce on Monday, a level not seen since February 2013 amid the enthusiasm inspired by the “Reddit” platform from retail investor groups.
The frenzy spread to high-selling small-cap stocks in the silver market leading to higher prices for physical metals, silver mines and exchange-traded funds.
When searching for the basics, deployments of the discontinued vaccine and new contagious coronavirus strains have boosted the appeal of the mineral safe haven.
Doubts remain over whether the US Congress will pass the $ 1.9 trillion stimulus plan unveiled by the new Biden administration.
On the technical level, far from the market’s interaction with retailers ’news via the“ Reddit ”platform, silver prices may witness a strengthening of their prices during the first half of this year with the continuation of monetary policies by central banks.
Which will have a future impact on the global inflation situation, which is supportive of metal prices, and on the reality of the previous global crisis, we witnessed this rise in silver, which we may witness during this year as well.
After trading above the level of $ 28 an ounce with the beginning of the February sessions, silver may witness a rise towards areas of $ 32 an ounce, but we do not rule out a return to close the price gap and also test support levels of $ 26.80 an ounce.