WallStreetSilver and the Silver Squeeze: What You Need to Know
Speaking from a technical perspective, silver prices are extremely overbought. The Relative Strength Index on the daily time frame has reached near $70, which means a pullback is likely. If there is a pullback, prices may retrace to the $27 to $28 price level. You get all the benefits of owning physical silver, together with low-premium bulk pricing for orders of any size. Your purchase is immediately allocated to you, secured in the vault, and available to sell almost immediately if markets move. The phenomenon sent the price up 2,400% in only 11 trading days, capturing headlines and highlighted the power of retail investors in moving markets.
- This is exactly what happened recently to the shares of GameStop, an American video game retailer.
- This article will outline the foundational concepts of the short squeeze while providing insight on how to manage and trade around this contentious financial market phenomena.
- As this happens, it’s easy to foresee a significant increase in the price of silver.
- The hashtag “Silversqueeze” is top trending on social media channels, including Twitter and Reddit, and retail traders are buying silver like there is no tomorrow.
Meme Stocks Come Roaring Back
Banks lend because it is their business to lend, and it’s how they pay their depositors interest (or how they used to, before the War on Interest was won). The monthly silver chart shows the $22 to $30 trading range along with other likely resistance levels at $35, $45, and $50 that formed at prior peaks in 2011 and 2012. If silver can close above $30 in a convincing manner, the next price target to watch is $35 and so on. On Twitter, #silversqueeze was trending as investors turned their attention to the latest market strategy to emerge from the “WallStreetBets” forum on Reddit.
Will Wall Street Silver Short Squeeze Succeed?
Money managers have had a net long position on the metal since mid-2019, according to data from the Commodity Futures Trading Commission, Bloomberg reported. For example, Investor A borrows 10 shares of Company Z at $5 per share. A few days later, Company Z shares rise to $10 per share which means that Investor A is currently running a $50 loss.
A changing retail investment environment
He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem. In Europe, this buying frenzy might also take on devastating features next week and major supply bottlenecks may occur. Fractional reserve is a banking concept, when a bank lends most of its deposits.
The underlying causes of a profit squeeze are numerous but commonly consist of increased competition, changing governmental regulations, and expanding producer and supplier power. Consider this chart of the term structure of the silver futures market. It is a map of the bases and cobases of the near, next, and several contracts after that, all plotted on one graph. “There’s far more cash trying to chase physical assets because we’re suffering the bite of inflation, and supply in all of these markets is becoming extraordinarily thin,” explained Eric Sepanek. Watch his full analysis of the forces about to set off a physical silver rally on AZTV’s Mike Broomhead show.
Even if there were no underlying “bad acts” on February 2, 2021, the Hunt brothers have already proven that the government and heads of exchanges can change rules when they want to. What most people don’t realize is that a similar “raid” already took place in history. During the inflationary period in the 1970s, William Hunt, Lamar Hunt and Nelson Hunt set out to corner the market on silver. They purchased both physical assets and paper silver (e.g. futures contracts). There’s a thought among those in the community that market manipulation has purposefully kept the price of silver down.
DailyFX Limited is not responsible for any trading decisions taken by persons not intended to view this material. The collapse of Silicon Valley Bank in March 2023 illustrated several types of squeezes. First the bank faced a profit squeeze due to poor returns from its investment portfolio. Then jittery depositors rushed to withdraw their money in a modern-day version of a bank run, forcing it to liquidate a substantial portion of its investments at a loss. That caused fears of a domino effect in which other banks would fail, creating a nationwide credit squeeze.
Right now, silver futures are trading in a range between the $22 support level and the $30 resistance level that formed at the peak in early-August. If silver can push above $30 on strong volume, the odds of an even more extensive bullish move will increase. Robinhood’s faced major backlash and several lawsuits for restricting trading of some meme stocks.
Short-sellers borrow shares of stocks that they expect to drop in price. Then they sell the stock and attempt to buy it back at a much lower price. A short squeeze is a common eva is used to measure the firm optimum value through scenario in the equities market where a stock’s price increases and its purchase volume spikes because short sellers are exiting their positions and cutting their losses.
Given that silver prices took out the $30 price level earlier today, the next major psychological resistance is $35 and $40. The silver market frenzy extended to physical demand for the metal, with coin dealers reporting delays in deliveries as they were overwhelmed by demand. A big move in the physical price of silver could hurt big investors that were anticipating it to fall. But because large hedge funds own net long silver positions, it created a split once some of the traders on the message board realized this,” said Ross Mayfield, an analyst at Baird.
The first bank runs occurred in the fall of 1930 in Nashville, when account holders rushed to withdraw all of their funds at once from the bank. Quickly, this credit squeeze spread across the U.S., causing many banks to liquidate their loans to appease their depositors, leading to multiple bank failures. New York’s Bank of the United States had more than $200 million in deposits at the time when it collapsed in 1931, making it the largest bank failure in American history up to that time. A liquidity squeeze occurs when a financial event sparks concerns among financial institutions, such as banks, regarding the short-term availability of money. These concerns may cause banks to be more reluctant to lend out money within the interbank market. As a result, banks will often impose higher lending requirements in an effort to hold onto their cash reserves.
And while WallStreetSilver may focus on overcoming price manipulation, increased sales of electronics mean the demand will rise regardless. Some of the biggest recent happenings in the investment world have arisen thanks to users of the Reddit website and app. The insane increases seen in GameStop and AMC share prices had their inception in the WallStreetBets community, and the big news in silver is at least partially attributable to WallStreetSilver. They believe that silver is a highly undervalued asset and that its price is destined to rise. Since 2016, silver mine production has been on a steady decline, while industrial demand has been constant. President Biden has promised to invest 1.7 trillion dollars to fight climate change, an initiative that will involve a transition to renewable energy sources such as solar panels.
This is Keith’s fourth article commenting on the silver squeeze story. Vault operators and gold refiners have nothing to do with lending https://www.1investing.in/ metal. Unallocated metal accounts are not bank accounts, and the metal is not lent out to businesses, homebuyers, or consumers.