In this file photo dated Wednesday, May 9, 2007, Silver bullion, bars weighing five kilograms each, are displayed in the trading room of the stock exchange in Frankfurt, Germany. Silver futures jumped more than 10% on Monday Feb. 1, 2021, following strong gains over the weekend. (AP Photo/Michael Probst, FILE)
The erratic trading in shares of underdog companies like GameStop that turned markets combustible last week appears to have migrated to commodities, sending silver prices surging to an eight-year high.
Silver futures jumped more than 9% on Monday to $29.42 per ounce with #silversqueeze trending on Twitter. That exuberance spread to companies that mine precious metals, especially silver. Shares of Pan American Silver surged more than 9%, First Majestic Silver rose 18.7%, Hecla Mining spiked 21.8%, and Coeur Mining soared 17.6%.
Some analysts called price jump the latest assault by the smaller investors who sent GameStop soaring recently. But many of those same traders instead called it a trap set by hedge funds to divert their attention away from GameStop, as the saga captivating Wall Street gets even more dramatic.
An online army of Reddit traders banded together for the past week to snap up thousands of shares of GameStop, AMC and other struggling chains, stocks that have been heavily shorted (bets that the stock will fall) by a number of hedge funds. In the process, they've done heavy damage to those hedge funds in a stunning reversal of financial power on Wall Street.
Some of these smaller traders believe the hedge funds that were pillaged last week are behind the surge in silver. Communications on messaging boards claim hedge funds have now become active on Reddit anonymously, attempting to drive them out of GameStop bets and into silver, but only after hedge funds had taken huge positions.
“IT’S A TRAP!” one Redditor warned, though no one really seemed certain.
Meanwhile, GameStop shares dropped 28% to $233 but the stock price has been tremendously volatile of late. Last week a 44% drop on Thursday was followed by a 68% jump Friday.
The number of GameStop shares that have been shorted (bets that the stock will fall), were slashed by more than half in recent days, according to a report Monday by the analytics firm S3 Partners.
Last week’s turmoil caused hedge funds to pull back on their investments by the sharpest degree since February 2009, during the market collapse caused by the financial crisis, according to Goldman Sachs, which provides services such as clearing and consulting to hedge funds.
Goldman says hedge funds have have been getting out of both short sales, where they’re betting a stock will fall, and more traditional investments that bank on rising prices “in every sector,” according to a Goldman Sachs report Monday.
Even so, hedge funds' exposure to the stock market remains close to record levels. That means there’s still risk for more sell-offs by hedge funds.
The narrative has burst from financial pages, reaching even the White House, where President Joe Biden and Treasury Secretary Janet Yellen were peppered with questions about it last week.
On Monday, White House press secretary Jen Psaki was asked about GameStop and said that the incident/market volatility raises “an important set of policy issues.”
“We think congressional attention to these issues is appropriate,” Psaki adds.
The story has also moved out of Reddit chatrooms and into places where silver actually trades hands. Coin dealers are being overwhelmed by orders Monday.
The Silver Mountain, a Netherlands-based bullion dealer, said on its website that, “Due to extreme market volatility we cannot accept any new orders at this moment,” adding it hoped to reopen by the afternoon.
____
Jonathan Lemire contributed to this story from Washington.
Updated on February 1, 2021, at 3:42 p.m. ET with the latest details.
Art Hogan, Chief Market Strategist at National Securities, joined Cheddar News' Closing Bell, where he says investors are taking a wait-and-see approach when it comes to the situation between Russia and the Ukraine and elaborates on the impact higher oil prices stemming from the conflict would have on the market.
Kyle Jaeger, senior editor for Marijuana Moment, joined Cheddar News' Closing Bell, where he explains why a stigma still exists for the cannabis industry in advertising and social media after NBC rejected Weedmaps' ad for the big game even though more states across the country are legalizing cannabis.
A bipartisan bill introduced by U.S. Senators Amy Klobuchar (D-MN) and Cynthia Lummis (R-WY) aims to tackle the spread of misinformation on social media platforms, as well as the addictive nature of the sites and negative mental health impacts they have on users. The 'Nudge Act' would require studies to find and compile potential interventions that platforms could use to encourage people to think before they share a post, or log off after spending too much time on an app. The FTC would create rules based on these findings, and hold the platforms accountable. But will it work? Jesse Lehrich, co-founder of Accountable Tech, joins Closing Bell to discuss the bill, whether real results and regulations could come from it, and more.
We know that the Los Angeles Rams emerged as Super Bowl champions, but the crypto industry also came out a winner on Sunday with several notable companies getting airtime in primetime. However, Richard Smith, author of the Risk Rituals Newsletter, joins Cheddar News' Closing Bell, where he says the campaigns were a 'disappointment' and adds that crypto companies would be wiser spending their resources on creating value.
A.I.-based entertainment company, Deedub, recently raised
$20 million in a Series A round, led by Insight Partners. Deepdub uses A.I. technology to automate the dubbing process for foreign-language movies or TV shows, while using actors' original voices. The company says it can take just two to three minutes of data from an actor's voice and transform the voice into a different language. The funding comes as foreign-language films and shows like Netflix's 'Squid Game' have recently become more popular with audiences in the U.S. and around the world. Oz Krakowski, Chief Revenue Officer at Deepdub, joins Cheddar News' Closing Bell to discuss.
Energy Vault, the company developing sustainable, grid-scale energy storage solutions, is now trading on the New York Stock Exchange following the completion of its business combination with Novus Capital Corporation II. Energy Vault develops sustainable, grid-scale energy storage solutions designed to advance the transition to a carbon free, resilient power grid. Robert Piconi, co-founder and CEO of Energy Vault, joins Cheddar News' Closing Bell to disucss.
A new mobile app has launched just in time for Valentine's Day. Our.Love bills itself as an A.I.-powered, gamified, relationship wellness app for couples. The app is set in what the company calls the Coupleverse, a virtual world where each couple can build a virtual relationship home as they also build their real-world relationship. Founder and CEO Tal Zlotnitsky joined Cheddar to discuss how the app works. "The concept behind Our.Love is to give people the opportunity to understand where they stand in their relationship through very simple metrics that we provide within the app that will help them in real-time, see where they stand, see where their partner is, and be able to get closer together," he said.
Alyson Wilson, VP of Brand Innovation at Alo Yoga, joins Cheddar News to discuss the yoga apparel company entering the metaverse and teaming up with Spring Studios for New York Fashion Week.
