SINGAPORE, (Reuters) – Silver broke above $30 an ounce for the first time since 2013 today as an army of retail traders stormed into the metal after betting billions of dollars on stocks last week, triggering risks of a multi-asset melt-up in global markets.
Organised in online forums and traded with fee-free brokers such as Robinhood, small-time investors have driven a 1,600% rally in the shares of video game retailer GameStop, scooping up assets big fund managers had bet against.
The phenomenon spilled over into silver late last week.
Spot silver leapt more than 11% in London to $30.03 an ounce and was on track for its biggest one-day rise since 2008, taking gains to about 19% since last Wednesday.
The jump set off a rally in silver-mining stocks from Sydney to London, with Fresnillo shares soaring 20.5% to top the UK blue-chip FTSE 100 index.
The action in silver, following thousands of Reddit posts and hundreds of YouTube videos suggests that a rise in the physical price could hurt large investors with bearish bets, also marks a foray into a much bigger and more liquid market than individual stocks.
“I would look at the silver rally the same way as I would the GameStop saga – from the point of view of market stability, for now it’s not an immediate concern, but if we see sharp moves we could see some deleveraging in markets,” said Antoine Bouvet, a rates strategist at ING.
“This reducing of risk through deleveraging could potentially boost demand for bonds if it is causing excess volatility.”
In the first signs of deleveraging, Goldman Sachs said the amount of position-covering last week by U.S. hedge funds, buying and selling, was the highest since the financial crisis more than a decade ago.
Nevertheless, their market exposure to stocks remains near record levels, the investment bank warned.
HICCUPS
The rush to silver and GameStop-like stocks has been testing limitations in newer trading platforms and processing venues, frustrating retail traders who are unable to feed their hunger to buy and sell more frequently.
The feverish silver buying has hit a glitch, with large U.S. broker Apmex warning of processing delays while it secures more bullion. The Money Metals exchange suspended trade until mid-morning Monday.
Trading volumes in small miners’ stocks in Australia were unprecedented and jumps in some exploration firms, which do not actually produce silver, topped 90%.
Similar hiccups were seen in equities last week. GameStop, AMC and a few other volatile stocks saw temporary buying restrictions in trading apps like Robinhood as frenzied buying led to trading apps putting on curbs.
“The Reddit crowd has turned its sights on a bigger whale in terms of trying to catalyse something of a short squeeze in the silver market,” said Kyle Rodda, an analyst at brokerage IG Markets in Melbourne.
“This is their big, bold Moby Dick moment,” he said.
