Silver exchange-traded products (ETPs) surged to an eight-year high on Monday after Reddit forum WallStreetBets called on its army of followers to pile into the precious metal in an effort to corner the market and short squeeze some of Wall Street's largest banks.
The world's largest silver ETF, iShares Silver Trust ETF (SLV), has been the target. SLV saw a record $943m inflows last Friday and a further $551m on Monday taking its assets under management (AUM) to $18.4bn.
The huge inflows have come after WallStreetBets argued the price of silver “should” trade around $1,000 an ounce instead of its current levels at $25 amid plans to inflict more pain on Wall Street banks with claims many are short the precious metal.
“Silver bullion market is one of the most manipulated on earth,” the Reddit post said. “Any short squeeze in silver paper shorts would be epic. Demand physical if you can.
“Think about the gains. If you do not care about the gains, think about the banks like JP Morgan you would be destroying along the way.”
It appears attempts to corner the market have worked in the short term with silver ETPs up around 9% on Monday, however, the precious metal has fallen 4.5% by mid-morning trading today (2 February).
Silver ETPs are physical strategies meaning they have to buy silver bullion when inflows surge. This has the effect of removing silver from the global physical market which in turn, drives up prices.
It is thought the WallStreetBets forum has around $1.4bn market buying power highlighting the potential the traders have to move asset prices.
While exposure toGameStop was fairly minimalfor European ETF investors, the same cannot be said for the silver market.
Approximately $5bn assets are tied up across seven silver ETPs in Europe from WisdomTree, DWS, BlackRock and Invesco, the largest being the $2.9bn WisdomTree Physical Silver ETC (PHAG).
While $1,000 an ounce is certainly a far fetched call, analysts on Wall Street have been bullish about the outlook for silver.
According to analysts at Goldman Sachs, silver is the firm’s precious metal of choice amid a recovery in global industrial output and gaining momentum of solar, of which silver is a key component given its highly conductive qualities.
Jeffrey Currie, global head of commodities research at Goldman Sachs, added: “Silver remains our preferred precious metal as it benefits from both debasement theme and green energy led industrial recovery.”