Singapore market.
GameStop video game retailer, at the center of last week’s “Reddit rally”, fell 30.8% to $ 225, but other stocks caught in the frenzy that hit short sellers extended their lead, including BlackBerry.
Silver prices rose to an eight-year high of just over $ 30 an ounce before increasing earnings to trade by 6.3% to $ 28.70.
Lots of people waiting for a silver GameStop rally “realize now that there is not enough buying pressure to push it, as some had thought,” said Michael Matousek, chief trader at US Global Investors.
It was not clear how long the Reddit-fueled rally would last in the shares shortened by hedge funds. It could mean more losses in the broader market this week if the funds need to continue to sell to meet redemptions or correct their portfolios. In the longer term, they may need to change strategies.
Stock prices rose sharply last week, when small traders, who organized online forums and traded on duty-free brokers such as online brokerage Robinhood, broke some strong hedge funds with losses on their short positions.
The effect of the fight on the wider American market diminished on Monday, with shares ending abruptly after last week’s steep sales. AMC has been flat after rising by more than 500% this year. BlackBerry shares were higher in trading in New York and Toronto.
The confrontation drew the attention of financial regulators, parliamentarians and the White House, worried about possible market manipulation.
Robinhood chief executive Vlad Tenev is due to testify before a committee of the US House of Representatives on February 18, Politico reported on Monday, citing people familiar with the matter.
Robinhood raised another $ 2.4 billion from shareholders just days after existing investors raised $ 1 billion, he said in a blog post. The company, which faced outrage last week over reducing shares, raised trading limits for GameStop, AMC, Koss Corp and Express.
The company is preparing for an initial public offering, but it has not been clear whether it will continue with these plans.
Cold water
Traders and analysts have poured cold water on the chances of a prolonged silver rally, saying that, unlike GameStop, there is no excessive short positioning and that the options market is fairly well balanced.
Speculative financial investors were already quite optimistic, dealers said. Net long positions in COMEX Silver futures and options have risen to about 44,320 lots since January 26, according to data from the Futures Trading Commission (CFTC).
“Unlike single shares, the silver market is much larger and more complex and therefore more difficult to handle,” Raffi Boyadjian, a senior investment analyst at XM, said in a statement.
Traders were increasingly concerned that the Reddit effect could spread to less liquid commodity markets. However, traders said that exchange-traded funds that focus on commodities are more likely to be targeted.
The iShares Silver Trust ETF, the largest silver-backed ETF, jumped 7.1% on Monday. The data shows that its holdings increased by a record 37 million shares from Thursday to Friday alone, each representing an ounce of silver.
Mining figures BHP Group, Glencore and Anglo American were the top six winners on the FTSE 100 in London. Fresnillo mining increased by 8.95%, and small-cap American miners Hecla Mining and Coeur Mining increased by 28.3% and 23.1%, respectively.
Natural gas has increased by about 10% in months, partly due to expectations for colder weather, although such moves are not out of the norm for the market.
Retail investors on the popular Reddit online forum WallStreetBets expressed concern Monday that betting on silver is declining.
“By buying silver … you would put the money directly in the pockets of EXACT HEDGE FUNDS ON THE OTHER SIDE OF $ GME,” wrote a user who asked investors to continue buying GameStop. “It will put you on the brink of this just and glorious war we are in.”
The shortening of GameStop shares cost hedge funds a total of $ 12.5 billion in January, data from financial analysis firm Ortex said on Monday.
Injury of short sellers
The silver rage began on Thursday after WallStreetBets posts asked investors to buy physical silver.
“Go out there and buy at least 4 ounces of silver as fast as you can,” a forum participant posted.
Retailers poured a record $ 40 million ($ 30.6 million) into the ETF Securities’ physical silver fund in Australia by the afternoon. A silver ETF in Japan rose 11%.
The short global interest rate on silver, or the cumulative value of the bets it drops in price, is equivalent to about 900 million ounces, just a short time from global annual production.
Banks and brokers own most of this, but it is unclear whether they are clearly short of metal or whether their bets offset very large physical holdings.
JPMorgan analysts said the fundamentals did not justify a sustained decoupling of gold silver. Gold prices have risen by less than 1% in months.
(Reporting by Tom Westbrook and Thyagaraju Adinarayan in London and Jeff Lewis in Toronto; Additional reporting by Gavin Maguire in Singapore, Luoyan Liu in Shanghai and Abhinav Ramnarayan, Sujata Rao and Karin Strohecker in London, Lewis Krauskopf, Devika Krishna Kumar and Marcelo Teixeira in New York; Written by Sonya Hepinstall; Edited by Jan Harvey and Matthew Lewis)
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