Forget about the Covid-19 pandemic; it seems the major mover of markets these days has more to do with investor forums like Reddit. Silver could be the next target, which could give funds like the Invesco DB Silver Fund (DBS) a boost.
“Silver futures prices and shares of silver miners climbed Thursday after a user in Reddit’s popular WallStreetBets forum posted about executing a ‘short squeeze’ in the notoriously volatile precious metal,” a Wall Street Journal article noted. “Most actively traded silver futures closed up 2.1% at $25.922 at troy ounce after earlier adding as much as 6.7%, while U.S.-listed shares of First Majestic Silver Corp. AG 21.38% , a mining company, ended the day up 21%. The iShares Silver Trust, a popular exchange-traded fund tied to silver, also surged.”
“Silver prices had generally been muted in recent weeks, staying in a tight trading range alongside other precious metals that was well below the multiyear highs it hit during a rally last summer,” the article added. “But Thursday’s gain at one point was pushing the metal back near that nearly eight-year peak.”
DBS seeks to track the DBIQ Optimum Yield Silver Index Excess Return, which is intended to reflect the changes in market value of silver. Additionally, the fund holds Treasury Securities, money market mutual funds, and T-Bill ETFs for margin and/or cash management purposes only.
DBS is up 50% within the past year, boosted by a flight to safe haven assets during the height of the pandemic. The precious metal appears to be heading toward a consolidation phase, and the latest Reddit run-up may be what the fund needs to continue the uptrend and reach a new one-year high.
Not Silver’s First Rodeo In Short Squeezing
The recent interest in silver isn’t the precious metal’s first rodeo with short squeezing.
“A short squeeze occurs when short sellers borrow an asset, sell it and try to buy back at lower prices,” the WSJ article added. “If the asset’s price rises sharply, short sellers are forced to buy back at higher prices to minimize their losses, getting ‘squeezed’ out of the market. Analysts have alleged price manipulation in the silver market going back several decades, including when regulators famously accused the Hunt brothers of driving up prices in 1979 and 1980.”
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