The second silver squeeze or ‘silver squeeze 2.0’ took place on May the 1st – although this fell on a Saturday so much of the price action was captured on May the 3rd. Thereafter, for the remainder of February prices actually dropped below the spike high but remained above the pre-squeeze levels. The price of silver rose less than $4 between Friday the 29th of January and Monday the 1st of February. The superimposed orange line depicts the price of the continuous silver futures contract, which witnessed a spike but failed to raise prices significantly, as was expected. The surge in volume is circled in red, while the average true range (ATR) indicator – which depicts an average of daily price movement – also peaked. The candlestick chart below highlights the gap up in the price of the fund with an almost immediate retracement bringing prices back to where they were before the massive inflows. A sharp surge in interest in the ETF would lead to a sudden increase in the demand for silver and likely result in a sizeable increase in the price for the commodity.Ī staggering $1 billion flowed into iShares Silver Trust the Friday before the planned silver squeeze, forcing it to purchase an additional 34 million ounces of physical silver to leave the total stockpile at just over 600 million ounces.
The idea was to buy into the ETF which would force the fund to allocate new shares and purchase silver to back them. The first and second silver squeezes were said to have been conducted via the world’s largest silver Exchange Traded Fund (ETF), iShares Silver Trust, which has a $15.97 billion market cap at the time of writing. Thereafter, the WallStreetBets community decided to turn their sites towards the silver market in an attempt to raise the price of a market that has long been rumored to be intentionally suppressing prices. Initially, the orchestrated activity succeeded in drastically raising share prices but the exponential rise was cut short as retail brokerages, most notably, Robinhood, restricted the purchasing of the meme stocks citing increased clearing firm charges. In January 2021, a finance-focused community under the name ‘WallStreetBets’, hosted on the popular online forum, Reddit caused quite a stir as news broke of their intentions to bid up the prices of a number of targeted meme stocks in an effort to achieve a short squeeze. This article takes a look at the events surrounding the silver squeeze and some of the difficulties of shorting the silver market. However, the supposed silver squeeze and the one that followed have been rather ineffective when compared to short squeezes on Gamestop (GME) and the like. “It’s not going to break,” Christian says.It was shortly after the Reddit-fueled, meme stock saga that the silver market landed squarely in the cross-hairs of the online community. There are plenty of large bars around.Īnd yes the market is tight, partly due to seasonal demand, but it is no so tight it is a problem. There is a shortage of silver coins and small bars, again CPM’s Christian explains.
That’s something that Redditers may have believed. Note, however, data suggests funds have been net-long for some time.”Ī further misconception in the silver market is that there is a shortage of silver.
Therefore, even if the CFTC data shows financial companies with a net short position it will likely be offset with physical holdings. They do this by selling futures contracts for the same amount of ounces as they own physically.
Banks that deal in physical commodities typically hedge their price risk.
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