Traders pump silver as GameStop drops
Silver surged nearly 7 percent Monday as online investor communities adapted their GameStop playbook to the precious metal, a strategy that sent shorted companies soaring last week and battered the Wall Street hedge funds that had bet against those stocks.
GameStop sank 30.8 percent, to $225.01 a share, Monday even as the broader market advanced. The video game retailer’s stock popped 400 percent last week and has seen an 18-fold jump since December.
stocks — which tumbled last week amid anxiety over the frenzied trading that’s being cheered on by the Reddit forum WallStreetBets and other online communities — turned things around on Monday. The Dow Jones industrial average closed up 229.29 points, or 0.8 percent, to 30,211.91. The S&P 500 gained 59.62 points ,or 1.6 percent, to settle at 3,773.86. The tech-heavy Nasdaq climbed 332.70 points or 2.6 percent, to end the session at 13,403.39.
Big Tech helped spark that positive momentum. On Monday, Google and Ford announced a six-year partnership to develop technolofor the automaker’s vehicles. Starting in 2023, Ford and Lincoln models at all price points will be equipped with Google apps and services, powered by Android. Google was also named as Ford’s go-to provider for cloud services.
Silver became the big topic on investor forums, with enthusiasts asserting that the metal is undervalued and that heightened demand will drive up prices. Critics described the spike as a distraction and a financial trap.
Precious metals are typically seen as haven assets, especially in times of economic uncertainty and wild swings in the stock marU.S. ket. The assets are seen as a buffer against inflation and lower interest rates; they tend to be relatively stable over long periods of time and not easily dragged down by the fluctuation of other currencies. Silver has additional uses as an industrial metal in electronics, adding to the potential for future gains.
Ed Moya, senior market analyst at OANDA, said silver’s rally is partly driven by retail investors who are noticing GameStop’s surge slow down and are looking to pivot to what’s next — in this case, silver, which has long struggled to win appeal over the rise of cryptocurrencies but is now catching the atgy tention of a new wave of traders.
“Everyone was scrambling to say, ‘OK, well, if GameStop is pretty much done, what’s next?’” Moya said. “There was this belief that, ‘Wow, we can really cause a disruption here. If we can send our army of traders to buy silver coins because they wouldn’t be able to keep up with demand, it would have this domino effect on prices.’”
But some members of WallStreetBets tried to wave off investors from buying silver, arguing that the rally would benefit hedge fund Citadel Advisors, which owns 6 million shares of the metal.