The price of silver rose by 4 per cent on Friday, a day after a user on Reddit’s WallStreetBets forum urged people to buy shares in a leading silver exchange-traded fund to create a “short squeeze” in the market.
The price of silver rose to $27.4 an ounce in morning trading, following a 6 per cent rise in the shares of the iShares Silver Trust on Thursday.
On Thursday user u/TheHappyHawaiian said buying shares in the ETF would “force physical delivery of silver” into its vaults, thereby causing a “short squeeze” on the market, pushing up the silver price. That would present problems for traders who were short silver on the futures markets, they said.
“The people naked shorting silver via the futures markets are a couple of large banks and making them pay dearly for their over leveraged naked shorts would be incredible,” the user said.
Silver surged by as much as 7 per cent on Thursday while the price of the iShares Silver Trust ended the day $1 above its net asset value due to the influx of buying.
Analysts at Commerzbank, however, said that the impact on silver was likely to be muted, given the large size of the silver futures markets.
“We are confident that the influence of retail investors on silver will not last all that long, and that ultimately industrial and institutional demand will be the key factor in the longer term,” they said. “That said, the latest price surges are likely to see financial market participants focus more on precious metals again.”
Shares in silver miners also rallied on the news on Thursday with New York-listed First Majestic Silver up by 22 per cent. The miner was targeted by a series of Reddit users on Thursday calling for a “short squeeze” against those betting on a decline in the stock.