Another week, another strange journey into the wild world of reddit-fuelled stock market chaos. Or, rather, attempted chaos, as precious-metals experts at Global Bullion Suppliers explain.
Just a week after the reddit community on r/wallstreetbeats sparked a short squeeze in Gamestop Corp. that sent its market value soaring, the community was at it again, this time trying to engineer a short squeeze in silver.
To offer some context, in January these redditors went all-in on short squeezing Gamstop, which involved pushing the price of its stock to force those betting on a price drop to buy-back their positions. The company saw its stock price skyrocket after members of that Reddit group pushed up the price of the stock enough to force short sellers to exit their positions.
Then the community went after silver, which saw its spot price vault as high as $30.03 an ounce on Feb. 1 from $25 on January 28, and shares of silver miners surged as well.
Thing is, what the online community did with Gamestop didn’t work, really, with silver. Silver differs in important ways from stocks such as GameStop. For one, the scope for a short squeeze in silver is far less obvious: finance managers have had a net-long position on the metal since mid-2019, futures and options data from the Commodity Futures Trading Commission show, as BNN writes.
The report goes on to say, “The market for silver is also by some measures much deeper than those for smaller stocks like GameStop. The bricks-and-mortar video game retailer had a market capitalization of about US$1.4 billion in mid-January, before the Reddit frenzy sent the company’s value soaring more than 16-fold. By contrast, London vaults held 1.08 billion ounces of silver at the end of November, according to LBMA data. That’s worth almost US$32 billion at current prices.”
What did result is that the market is facing short term issues moving silver in the right forms to the right vaults. A shortage of silver spread across bullion suppliers worldwide.
Still, draining liquidity enough to send prices to $100 or $1,000 will be difficult, if not a starry-eyed dream.
“The reddit community failed, plain and simple,” says Max Smirnov, CEO of Global Bullion Suppliers, a leading precious-metals consultancy and supplier in Canada. “All it did was create a shortage and also boosted the premium on silver, so people are paying more for silver now, and really the banks are the winners here.”
Smirnov says the silver market is just too big for investors to manipulate. His point is echoed by Jeffrey Currie, global head of Commodities at Goldman Sachs, who told Kitco: “To corner the market and create a short squeeze, we estimate would require each one of the Wall Street Bet individuals to accumulate positions of around 4,200 ounces. That is a lot of silver, and where are you going to put it.”
He adds a historical footnote: After the Hunt brothers infamously tried to control the entire silver market in the 1980s, regulations were added to make it nearly impossible to corner the market.
Smirnov goes on to say he’s seen many investors dive into silver in the past week without really understanding the commodity. “Now is the time to educate people about bullion because folks are getting into it without knowing what they’re doing. They’re going to lose their shirts if they don’t learn about the market.”
He suggests booking a free consultation session with Global Bullion Suppliers to learn more about the pros and cons of investing in precious metals, especially if an investor is hearing about the value of silver for the first time.
GBS recently moved its Toronto location from Prince Arthur Avenue, near Bay and Bloor streets, to around the corner in the heart of Yorkville at 128 Cumberland Street, along with its sister business Muzeum. Smirnov says this move will further elevate GBS and its precious-metals experts to be top-of-mind when Toronto investors consider which business to consult to discuss the viability of investing in silver, gold and other commodities.
It’s always advisable to turn to a reputable gold seller such as GBS who employ experienced precious-metals specialists and can provide visitors with accurate information on what options you have if you are seeking to invest in gold and silver today, Smirnov says.
And you don’t have to be from Toronto or even Canada to learn from GBS’s specialists. Contact them anytime for a free consultation to learn about the many nuances of investing in silver and gold.
In an interview with one of the leading experts on silver shorts, GBS talks to Chris Marcus to learn more about the many angles of the silver story everyone has been talking about for several weeks.