XAGUSD, H4
Inspired by the success of their attack on short positions in US stocks, the Wall Street Bets Reddit investors are heading into silver market.
After pumping up the quotes of the dying retailer GameStop by 1700% and forcing the hedge funds that were betting on their fall to capitulate, the 3 million community has chosen large American banks as its new target, including JP Morgan, the country’s largest asset ($ 2.7 trillion).
Key Notes
On Wednesday, January 27, a shoutout started in the community to buy up silver futures and options to accelerate its price from $25 to $1000 per ounce and arrange “the biggest short squeeze in history” by squeezing Wall Street speculators out of short positions.
“The physical silver market is one of the most manipulated on the planet. Any squeeze of paper shorts will be epic. We know that banks with billions are manipulating the price of gold and silver to hide true inflation,” wrote a user.
“Think about profit and if profit is not important to you, think of the big banks like JP Morgan, which you will destroy in the process,” he added. The results were not long in coming. On Thursday, the silver price jumped 6.9% to $27.1 per ounce but pulled back at the end of trading, slowing down to 2.3%.
On Friday, however, the market took off again. June 15 COMEX futures are up 6.2% and are trading at $27.54 per ounce. This is a new high since January 6, which is still 10% short of a 7-year high. Silver-mining companies jumped after, and options on shares of iShares Silver Trust – the largest exchange-traded fund investing in precious metals flared up. “In the very short term, people will be careful to be short in precious metals, regardless of fundamental outlook,” said Marcus Garvey, head of commodities strategy at Macquarie Group.
However, over the longer term, day traders are unlikely to have the same impact on silver as they would on low-liquid US stocks, said Adrian Ash, research director at brokerage BullionVault. “It’s one thing to short-squeeze stocks where the share of short positions reaches 140%, and it is another to try to accelerate a commodity, whose stock is three times the average daily turnover of futures trading,” explains Ash. The silver idea has caught the crowd’s attention, he admits, but whether it can stay hyped for long is unclear.
And so it proved to be, but not before at rally to over $30.00 on Monday, followed yesterday as “the pigeons came home to roost” as the CME widened margins and the price fell over 10% from its peak to close the day at $26.60¹. A week on from the initial gossip on the Reddit boards and silver is trading at $26.86, still elevated, and with a daily pivot point at $27.10, S1 support and the 20-day moving average at $25.65 and $25.85 respectively, with resistance to higher prices at $28.20.
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Adnan Abdul Rehman
Regional Market Analyst
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