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.

Share:
More In Business
What to Expect From the Federal Government on Cannabis Legalization in 2022
Cheddar's Chloe Aiello has our cannabis year-in-review, breaking down how several states legalized adult recreational use and greenlit medicinal use in 2021. She noted that while a cannabis legalization and decriminalization bill was introduced in Congress this year, potential FDA involvement in the industry, as well as a 25 percent excise tax, killed any chance the bill had of moving forward. Aiello also speculated that some form of cannabis reform could be rolled out in 2022, as the midterm elections draw closer.
Elizabeth Holmes Awaits Jury's Verdict in Day 6 of Deliberations
Jurors in the trial against Theranos CEO Elizabeth Holmes have entered day six of deliberations. Holmes is accused of lying to investors about the functionality of a newly developed blood-testing technology. Andrew George, partner at Baker Botts, joined Cheddar to break down key points in the case and what the jury might be considering during their deliberations. He also noted that the rest of Silicon Valley, including Holmes' business partner, Ramesh "Sunny" Balwani, who is facing identical charges, is closely watching the outcome of deliberations — as it could set the tone for future regulations and Balwani's own trial.
Volatile Crypto Derivatives Market Fuels Bitcoin's Latest Downturn
While slumps within the crypto market have typically correlated with major developments, such as China's crypto crackdown or Tesla reversing course on accepting bitcoin, the current slide is coming at a time when the stock market is at or near record levels. Reporter Alex Vuocolo talks about the role of the crypto derivatives market in bitcoin's latest price drop, as well as the future of sustainability in the space.
Wildfires Out In The West Impacting California's Carbon Cap-and-Trade Program
According to researchers, the state of California's cap-and-trade program is currently being undermined by forest fires caused primarily by climate change. Over the past few years, trees that were set aside for the program have been releasing carbon as they continue to burn in fires. Climate Researcher and Policy Director at CarbonPlan Danny Cullenward, joined Cheddar to discuss more.
How Gopuff is Shaking Up the Delivery Service Industry
Daniel Folkman, senior vice president of business at Gopuff, joined Cheddar to talk about the company's year of hypergrowth in 2021, particularly amid the COVID-19 pandemic, and what consumers can expect from the quick delivery market in 2022. He noted that the company's delivery sector performed at a high level this year but its e-commerce business is still in its infancy, with less than 10 percent of customers purchasing items sold by Gopuff. Folkman also talked about production expansion, including freshly-made pizza and milkshakes that people can order along with their cleaning supplies.
Load More