Silver was the star of the show yesterday as it experienced a major rally as the cabal of Reddit-retail traders honed in on the metal to spark a short squeeze.
The band of retailer traders that ratcheted up the price of Gamestop shares last week poured their funds into silver. Excitement was heating up over the weekend as there was increasing chatter of #silversqueeze grew. Yesterday, the metal was boosted to its highest level since February 2013.
“Regulators are understandably concerned by the activity triggered from forums on Reddit as there could be elements of price manipulation at play. It is the job of the regulator to ensure that nobody is gaming the market for the own gain,” said David Madden, market analyst at CMC Markets UK, this morning.
“While the regulators might have been a little nervous yesterday, the mood in stock markets was upbeat. Equity traders were fearful last week as there were brief worries that losses incurred by certain hedge funds because of Gamestop’s monster rally might cause disruption to the markets as a whole,” Madden told City A.M.
Concerns circulated that investment firms might rush to liquidate positions as a way of freeing up cash to cover margin requirements. Even though silver was targeted by the Reddit brigade, the overall sentiment was positive.
“A number of hedge funds admitted they endured large losses on account of the Gamestop situation but some confidence was restored to the markets seeing as they are soldiering on. Indices in Europe and the US rallied yesterday,” Madden said.
Silver has handed back some of its recent gains as futures exchanges have raised margin requirements – it is a common move when volatility is high, he concluded.