FTSE 100 precious metals miner Polymetal International was 7.5% higher in early European trading.
Courtesy of Polymetal International
Silver-exposed stocks climbed early on Monday, after a surge in retail trading pushed the price of the precious metal to an eight-year high.
Silver has rallied in recent days as some users on Reddit’s WallStreetBets forum have seemingly turned their attention to the metal, following the frenzy which sent stocks such as videogames retailer GameStop and cinema-theater AMC Entertainment surging last week. Silver futures rose close to 11% to $29.825 per ounce on Monday, briefly touching $30.
Shares in London-listed miner Fresnillo jumped close to 17% in early European trading, the sharpest riser on the pan-European Stoxx 600 index. The Mexico-based miner’s stock rose 76% last year as gold and silver prices rallied in 2020.
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Fellow FTSE 100 precious metals miner Polymetal International was 7.5% higher, while the FTSE 250-listed Hochschild Mining rose 13%. A number of smaller Australian miners also benefited overnight, with Argent Minerals surging 60% and Investigator Resources rising 47%. In U.S. premarket trading, Canada’s Pan American Silver was 17% up and Wheaton Precious Metals rose 12%.
Retail traders may not find it as easy as GameStop when it comes to driving the price of silver higher still.
A number of posts on the WallStreetBets forum advocated buying silver, while #silversqueeze has also been trending on Twitter. However, many posts also argued against the trade.
The iShares Silver Trust, the world’s largest silver-backed exchange-traded fund, received more than $1 billion of inflows on Friday. The price of the precious metal surged higher again on Monday.
“What we don’t know is exactly how this is happening,” said Markets.com analyst Neil Wilson. “Clearing out of shorts by worried hedge funds, retail-driven bid, ETFs flows driving the physical market, smart-money front-running the trade, or a combination of all these,” he added.
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“The fact that such a large and liquid market as silver can be targeted by retail investors says much about the shift we are witnessing, though despite appearances this morning it’s going to be a lot harder to squeeze silver shorts as the market is so much deeper and more liquid,” Wilson said.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said the rise in silver doesn’t seem “far-stretched yet,” as from a pricing perspective silver lags behind gold. She said the price of silver could have well consolidated within the $30-32 band. However, she warned the rally may not last long. “For silver though, the rally could be short-lived as some leading members of Reddit WallStreetBets platform are already divided over the question, and advise against the move in silver,” she said.
“One important thing to remember in this game is, if you lose full support, and momentum, it’s over. This is why, the speculative rush is a prosperous, but a dangerous game.”
CMC Markets analyst Michael Hewson said the attention on silver may help U.S. stocks at the beginning of the week.
“With all the focus now on the precious metals market, U.S. markets look set for a positive start to the week, on the hope that the shift in focus for retail traders towards silver will give equity investors a break, from all the shenanigans around the likes of GameStop and AMC Entertainment, and other stocks that have been heavily shorted,” he said.
