Is A Silver Squeeze Ahead? Here Are The Charts To Watch

Home / Forex Trading / Is A Silver Squeeze Ahead? Here Are The Charts To Watch

However, recent activities in the market have belied the true nature of the bullish moves we have seen in the commodities space over the last year and we think that investors should continue to move portfolio holdings into assets with precious metals exposure. To short, or short-sell means borrowing a share or commodity, and then selling it. If the price falls, I can buy it back at a lower price, return it to the lender, and pocket the difference.

If silver can close above $30 in a convincing manner, the next price target to watch is $35 and so on. If last week’s trading activity is anything to go by, the price of silver is likely to remain highly volatile as traders will be keeping an eye on the “Silversqueeze” hashtag in their ongoing bid to rival Wall Street’s investors. Silver prices surged by more than 10% to over $30 an ounce Monday morning as Reddit-informed retail traders piled in on the commodity, the highest since February 2013.

  1. In a few weeks, when the short squeeze story gets stale, and everyone moves on to the next shiny bauble?
  2. If the price falls, I can buy it back at a lower price, return it to the lender, and pocket the difference.
  3. Our ultimate goal is to help extend our award-winning customer service to our educational content.
  4. If you don’t want to worry about market volatility, however, you’ll want to make sure you’re buying the right silver products.

The value of stocks, shares and any dividend income may fall as well as rise and is not guaranteed, so you may get back less than you invested. You should not invest any money you cannot afford to lose, and you should not rely on any dividend income to meet your living expenses. Stocks how to write a great request for proposal rfp for your website project listed on overseas exchanges may be subject to additional dealing and exchange rate charges, administrative costs, withholding taxes and different accounting and reporting standards. They may have other tax implications, and may not provide the same, or any, regulatory protection.

WallStreetBets Denies Involvement in the Attempted Silver Squeeze

The massive reduction in silver used in American coins is a major reason behind this decrease. If the U.S. government suddenly had a need for silver at its 1970 levels, they’d have to purchase over 300 million ounces to meet it. In fact, we could make an argument that WallStreetSilver single handedly created the current drive to buy physical silver.

‘The Silver Squeeze’: Redditors Divided And Silver Value Soars As Online Traders Switch Focus To Commodities

More than likely, recent market rallies in silver have come as the result of short-term trading disruptions that will probably turn out to be temporary in nature. However, that’s not to say that recent developments are insignificant in any way. Without much doubt, the Reddit Revolution will fundamentally change the way stocks are shorted throughout the market-at-large and shift the dynamics that have traditionally existed with respect to the retail trading community. When we last covered the emerging dynamics that are currently controlling prices in silver markets, the sometimes forgotten metal was trading near $24 an ounce and many analysts seemed to be saying that the “Great Silver Rally of 2020” might be coming to a close.

Despite having a consistent motive to the previous short squeezes – a protest against short-selling hedge funds – there are a number of issues when it comes to shorting the silver market. Nonetheless, it would be unwise to underestimate the purchasing power of retail investors, and the idea of this was clearly demonstrated last week. The task of a short squeeze may be a difficult one, but the fact is that hedge funds are against the ropes while retail traders are throwing the big hooks. Silver is different in many ways from individual stocks like GameStop, AMC, Blackberry and many more. For instance, having a short squeeze in silver could be difficult because it’s a much deeper and more highly liquid market. For instance, GameStop’s market cap was $1.4 billion in mid-January, but this increased 16 times over when Reddit traders started to talk up the stock.

Ultimately, it was believed that these rebellious activities amongst retail investors would lead to the “biggest short squeeze in the world” and that these events would eventually send the market value of SLV above $1,000. However, if that stock’s price increases drastically, it can cause short sellers to lose money by having to buy back at the higher prices to minimize losses. The silver squeeze is caused by investors buying up silver in an attempt to drive up prices and “squeezing” the investors. It’s entirely possible the idea of a silver squeeze could force prices up. In a few weeks, when the short squeeze story gets stale, and everyone moves on to the next shiny bauble?

In January 2021, GameStop and AMC weren’t the only stocks experiencing major swings fueled by certain Reddit communities. A user in the WallStreetBets forum posted about an attempt to create a short squeeze on silver futures. The superimposed orange line depicts the price of the continuous silver futures contract, which witnessed a spike but failed to raise prices significantly, as was expected.

Buying during the pandemic certainly played a big role, but it wasn’t until Reddit investors jumped in that the sale of bullion jumped over 250 percent. While this high level of interest has waned a bit, people have remain focused on WallStreetSilver, the Silver Raid and the potential impending silver squeeze. If you haven’t heard of these issues and events, the following guide will help you understand what’s going on and what it could mean for you. Given that silver prices took out the $30 price level earlier today, the next major psychological resistance is $35 and $40.

Because of these decreases, many people called it history’s “greatest theft in the silver market.” The raid that found its roots in WallStreetSilver intended to push back against price manipulation. Some of the biggest recent happenings in the investment world have arisen thanks to users of the Reddit website and app. The insane increases seen in GameStop and AMC share prices had their inception in the WallStreetBets community, and the big news in silver is at least partially attributable to WallStreetSilver.

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If we look at the quantity of silver stored in London vaults, it is nearly 1.08 billion ounces of silver, according to the LBMA data released back in November 2020. This puts the silver valuation stored in these vaults to almost $32 billion. As this happens, it’s easy to foresee a significant increase in the price of silver. Many Wall Street insiders even bet that this will take place in the near future. Regardless of what ends up happening, there’s no denying that WallStreetSilver has forever changed the precious metals market.

Their ultimate goal is to “squeeze” the market and increase silver prices. Of course, we know that silver has recently moved to trade near its highest levels in eight years and this is why short-term long positions based on hopes for a new “short squeeze” in the precious metals market are simply not justified. Many have also piled into the one-time-joke cryptocurrency Dogecoin, which was inspired by a viral image of a Shiba Inu dog. At various times, Robinhood has suspended purchasing for some meme stocks, a move that sparked almost universal outrage prompting angry consumers to tank the app’s rating on online stores with a flurry of one star reviews and politicians vowing to investigate. At its peak, Robinhood restricted trades from 50 companies, including GameStop, AMC Entertainment, BlackBerry and Nokia. Interestingly, the Reddit post in question argued that a new retail movement to establish long positions in SLV would force fund managers to buy physical silver and establish new shares so that supply shortages would emerge.

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The price of silver rose less than $4 between Friday the 29th of January and Monday the 1st of February. Thereafter, for the remainder of February prices actually dropped below the spike high but remained above the pre-squeeze levels. Initially, the orchestrated activity succeeded in drastically raising share prices but the exponential rise was cut short as retail brokerages, most notably, Robinhood, restricted the purchasing of the meme stocks citing increased clearing firm charges. “There’s far more cash trying to chase physical assets because we’re suffering the bite of inflation, and supply in all of these markets is becoming extraordinarily thin,” explained Eric Sepanek. Watch his full analysis of the forces about to set off a physical silver rally on AZTV’s Mike Broomhead show.

We have taken reasonable steps to ensure that any information provided by The Motley Fool Ltd, is accurate at the time of publishing. The content provided has not taken into account the particular circumstances of any specific individual or group of individuals and does not constitute personal advice or a personal recommendation. No content should be relied upon as constituting personal advice or a personal recommendation, when making your decisions. If you require any personal advice or recommendations, please speak to an independent qualified financial adviser.

With each piece we write, we bring our own personal experience and expertise, while combining that with today’s leading research and data. Our ultimate goal is to help extend our award-winning customer service to our educational content. Ultimately, we want you to feel comfortable and informed when making investment decisions, regardless of whether that is with us or not. What most people don’t realize is that a similar “raid” already took place in history. During the inflationary period in the 1970s, William Hunt, Lamar Hunt and Nelson Hunt set out to corner the market on silver. They purchased both physical assets and paper silver (e.g. futures contracts).

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