The beginning of this week saw a sharp rise in the value of silver; on February 1st, silver rose by twelve per cent to a value of $30 per ounce. This is the highest value that silver has seen in eight years.
Some analysts have attributed this rise a sudden surge of interest by retail investors, reporting a surge in demand for bars and coins. This had a short-lived impact, with Bullion broker Apmex reporting delays in transactions due to the increased demand.
The following day, however, the value had dropped by eight per cent to $27 per ounce. This follows a similar rise – and subsequent fall – in the value of GameStop shares, led by a forum on Reddit named r/WallStreetBets. The chain video game store was at the focus of small traders aiming to expose the corruption at the heart of wall street stocks; they stipulated that the fall of GameStop’s value had occurred due to bets within the market to this end.
To challenge this, many bought shares into the company, which saw shares hit a high of $482 last week. The value has since dropped as the trading effort lost momentum. It is thought that silver was swept up within this retail frenzy; the hashtag #silversqueeze was trending on Twitter, with some predicting that they would be able to throw corrupt hedge funds off-kilter.
It seems that the aim was to make large banks in the futures market suffer for supposed bets that the value of silver would fall, as was the case with GameStop. The Guardian, however, reports that the size of the silver market makes ‘much harder to influence than a single stock’. Henry Sanderson and Neil Hume of the Financial Times further point to the fact that ‘unlike GameStop, which had been the target of negative bets among hedge funds, there was no large short position in silver futures’. They suggest that bets had been placed on prices rising.
Some Reddit users strictly advised against buying silver, one detail in a post that ‘Buying silver will make you likely lose money and give it to the hedge funds and Citadel’, another stating ‘there is no sentiment among WSB members to buy SLV stock and the little that exists is under the scrutiny of WSB members’. Some go further to claim that the rise in silver prices had not been affected by the community at all and that media outlets reporting it as such were questionable in their credibility. Whether other small-time investors were influenced by internet trends is still up for debate.
Either way, it has been pointed out that buying SLV shares does not directly impact the value of physical silver. The value of silver was set to increase steadily over the coming years as the global economy slowly recovers from the pandemic.
Banks and governments have a vested interest in maintaining a stable value of gold and silver, as the value of precious metals is still intrinsically, though indirectly, linked to our monetary system. If anything, the short-lived nature of the surge in silver reveals that the odds are stacked against small investors attempting to influence the global market. If the spike was indeed caused by Redditors and such aiming to destabilise the market, the choice of SLV shares has ironically proved to be an untimely silver bullet to their efforts.
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