After the frenzy around the GameStop stocks in the last days, the attention has moved to silver, which saw a sharp up-tick in prices by more than 9% on Monday to around €773 per kilogram. Tuesday the price for silver fell again by almost 7% to around €718 per kilogram.
This has spread to the shares of affiliated industries such as mining companies but also away from stocks to trade in silver coins and bars. “We see very high demand for silver and the delivery times and premiums are on the rise” says Rolf van Zanten, director of the Dutch Bullion trading company The Silver Mountain.
The origin was that large groups of individual investors cooperated on Reddit and Twitter to target hedge-funds to prevent them from short-selling stocks of GameStop, traded as GME.
Short selling means lending a stock from someone else and then selling it and buying it back when the price fell. It is basically a bet against the success of a company in the hope that the value of the stocks will fall. Massive short selling in itself can lead to a loss of trust in a company and in consequence to falling stock-value.
The strategy of the individual investors was to artificially push the value of the stocks, so that the big hedge-funds that bet on the falling value had a massive loss because they had to buy back the stocks they had borrowed with the aim of short-selling them.
Pratyaksh Arneja, a student and individual investor based in The Hague thinks that things are going a bit too far: “Honestly, I feel like this Reddit joke’s going a bit far. People are literally taking it as financial advice when it’s just people trolling.” He said that in the end it might hurt people that got enticed by the excitement around the fight against big hedge funds but might be surprised when the prices drop again overnight.
For The Silver Mountain at least, the rising demand for silver meant that they got so many orders that They had to implement a two weeks waiting period for all new orders to be able to cope with the demand.
Price volatility will likely continue in the coming days. Even though van Zanten said that he was not allowed to make public predictions about the possible price increase in the near future, he said he “expects very big swings on a daily basis until things settle down.”