Speculative Trading Clouds
No silver linings here
Remember the game “Simon Says”? Today, some might say Simon goes by the name “Reddit,” the name of a social media forum for discussing politics, sports, and entertainment. In the waning days of January 2021, speculative chatter on the site led to a phenomenal run on inexpensive stocks, including video game retailer GameStop (NYSE: GME), movie house chain AMC Theatres (NYSE: AMC), and mobile device manufacturer BlackBerry (NYSE: BB). As investors snapped up shares, stocks skyrocketed, with GME showing outstanding gains in late January, doubling from an average of $18 during the first week of January to around $37 the following week. GME hit $150 by January 26 and the next day crested near $350 before finance company Robinhood Markets halted trading.
“The reason I invested in
GME, BB, and AMC was that it reflects a kind of paradigm shift in which short sellers (emergent from the pandemic and the expectation that airlines, retailers, and movie theaters would fail) could be forced through crowd action into leveraging their own bets,” says James Libengood, a mid-30s political theory doctoral student in Florida who invested a small amount of money in GameStop. “When Robinhood closed the buying of even smaller stocks like Bed, Bath & Beyond (NASDAQ: BBBY), I pulled all of the shares out at a small gain.”
So, where did investors go after Robinhood pulled the plug on GameStop?
“THE BIGGEST SHORT SQUEEZE IN THE WORLD $SLV Silver 25$ to 1000$” exclaimed a Reddit user in a January 27 post. The Reddit post continues, “inflation adjusted Silver should be at 1000$ instead of 25$. […] Why not squeeze $SLV to real physical price.” Within 24 hours, the post caught fire with countless users – many never having invested in silver before – dropping hundreds, even thousands of dollars in the white precious metal. Bullion suppliers, amid silver futures jumping 7%, were slammed.
APMEX, one of the largest bullion dealers in the United States, sent the following message to its customers that Sunday evening: “In the last week, we have seen a dramatic shift in silver demand from our customers. For example, the ratio of ounces sold per day was running about two times earlier in the week and closer to four times the average demand by the end of the week. Once markets closed on Friday, we saw demand hit as much as six times a typical business day and more than 12 times a normal weekend day. Combined with the extremely high demand levels, we are also seeing a surge in new customers. On Saturday alone, we added as many new customers as we usually add in a week.”
Universal Coin & Bullion principal Michael Fuljenz believes the spike in new investors will have positive impacts across the bullion and numismatic sectors. “A dealer friend of mine told me had 20 people lined up at his shop,” Fuljenz remarks. “Morgan Dollars, Saints, and Libs are all up due to the huge demand,” says Fuljenz. “But these investor mobs are pushing silver up, and it can go up much more dramatically than gold.” The Beaumont, Texas, dealer notes one of the tightest areas right now is 2021 American Silver Eagles, which are now in limited supply now ahead of a reverse design change slated for later this year.
“It’s unbelievable,” exclaims prominent precious metals expert Michael Garofalo. “This is unprecedented – and scary for those who don’t know what they’re doing.” But Garofalo says while the silver markets are responding to the crush of new investors, there are substantiated reasons silver was already poised for growth even before the Reddit-driven speculation in late January. “Industrial demand for silver is skyrocketing with increased production in things like electronics and solar panels,” the latter, adds Garofalo, representing a sector of green energy surely to increase under the environmentally-conscious leadership of President Joe Biden and his White House administration.
“How much silver is there to go around?” asks daredevil investor and COINage cryptocurrency editor James Passin. “The silver market is tight, and this creates an interesting situation. Oil went negative last year, and now we’re going the other way,” remarks Passin, pointing to sustained lifts in grain prices, copper and zinc values, and even college tuition. And, according to Passin, commodities aren’t the only thing in a squeeze right now.
“The middle class and folks in lower economic tiers are being squeezed by inflation. We’re at a point in history were technology has created monopolizing cartels. We’re also early in an era of inflation and the purchasing power of paper is getting small.” Is this all just the tip of the iceberg? “The big picture is that fiat money purchasing power is declining and we’re going to see inflation.”