Silver surges as retail investors take aim
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The price of silver shot higher in Asia as retail traders turned their focus to the precious metal following their success in pushing shares of games retailer GameStop up to stratospheric levels, while equities across the region advanced in a less volatile start to the week.
The spot price for silver climbed as much as 7.4 per cent to $28.99 per troy ounce in early trading on Monday, touching its highest level since August.
The rally came after a user on Reddit’s r/WallStreetBets forum urged people to buy shares and silver options to put a squeeze on banks. BlackRock’s iShares Silver Trust, the world’s largest silver-backed exchange traded fund, drew inflows of almost $1bn on Friday.
Users aimed to cause a “short squeeze” in the market by buying shares in the ETF, pushing up the price of silver and forcing physical deliveries of the metal. The ETF is backed by physical silver held in vaults, so it must purchase the precious metal when it receives new investments.
“I wouldn’t rule out things getting fairly volatile,” said Daniel Hynes, senior commodities strategist at ANZ. But he added that the massive gains for equities targeted by Reddit investors seeking to impose losses on hedge funds were unlikely to be replicated in the silver market.
“The market is significantly bigger and liquidity is quite huge [in silver] compared to some of those smaller stocks they’ve been trading,” Mr Hynes said.
On Monday, the rally in the price of silver lifted shares in Asia-Pacific-listed miners of the metal. Australia’s Silver Mines jumped as much as 45 per cent, while Silver City Minerals rose almost 42 per cent. In Hong Kong, China Silver Group was up almost 35 per cent while Shenzhen-listed Shengda Resources gained 10 per cent.
In broader equity markets across the region, shares were mostly higher after a choppy end to the week on Wall Street, where the S&P 500 closed out its worst five-day run in months on Friday amid a deepening battle between retail traders and brokers over stocks including GameStop and AMC.
Hong Kong’s benchmark Hang Seng index was up 1.8 per cent on Monday afternoon, while China’s CSI 300 index of Shanghai- and Shenzhen-listed shares rose 0.5 per cent. Japan’s Topix gained 1.1 per cent, and Australia’s S&P/ASX 200 was up 1 per cent.
Futures markets tipped US stocks to open higher, with the S&P 500 expected to rise 0.3 per cent. London’s FTSE 100 was set to gain 0.2 per cent.