The erratic trading in shares of underdog companies like GameStop appears to have migrated to commodities, sending silver prices surging to an eight-year high.

Futures of metal jump as users on Reddit call on peers to avoid ‘trap’

NEW YORK—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 9.3 per cent on Monday to close $29.42 (U.S.) 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 13 per cent, First Majestic Silver rose 23.54 per cent, Hecla Mining spiked 28.3 per cent and Coeur Mining soared 23 per cent.

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 30.77 per cent to close at $225, but the stock price has been tremendously volatile of late. Last week, a 44 per cent drop on Thursday was followed by a 68 per cent 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.

The narrative has reached even the White House, where U.S. President Joe Biden and Treasury Secretary Janet Yellen were peppered with questions about it last week.

On Monday, White House press secretary Jen Psaki said that the GameStop incident/ market volatility raises “an important set of policy issues.”

“We think congressional attention to these issues is appropriate,” Psaki adds.