The astonishing climb for precious metal investment witnessed at the start of the year continued well into February, breaking past previous records. The climb is particularly encouraged after a silver demand surge driven by social media.
Silver prices broke the highest level recorded since 2014 after a chain of events where retail traders aimed at the precious metal market. The chain of social media events came right after Redditors successfully took down funds wagering against GameStop.
The Dramatic Rise of Silver
In what could only be referred to as social media’s power, silvers prices rose to $30/ounce, an 11% rise in early February. The event was the biggest single-day percentage yield since 2008. The week before that, silvers registered a 6% jump with a strong rally in some silvers miners’ shares.
BlackRock, a sponsor of iShares Silver Trust, shared data that showed the global leader of silver-funded exchange-traded fund record nearly $1billion in inflows. These strong investment numbers came after a post on Reddit’s WSBs forum nudged fellow Redditors to buy options and shares to “squeeze” banks.
Ross Norman, an experienced precious metals trader, said, “It’s a fool’s errand, it’s financial anarchy; somebody is going to get hurt.”
While the silver prices rose, retail investors further pushed it as reports of silver bars shortage started pouring in.
A Reddit story
In February, the iShares Silvers Trust ranked one of the top six most-traded equity security within the retail investor’s circle.
A Reddit user, TheHappyHawaiian, wrote on the forum that if you bought shares in ETF, it would “force physical delivery of silver” into the vaults belonging to the funds. The situation would lead to a “short squeeze” and thus, send the silvers prices soaring.
Only a few tweets or stories on Twitter, Instagram, or LinkedIn could have had the same impact as this post on Reddit. Google Trends reported that worldwide English-language searches for “buy silver” passed “buy gold” for the first time since 2011.
Silver beats gold
Demand for silver beat gold, becoming the consecutive 7th month of net inflows at 25.8 tonnes. It was the heaviest inflow since October last year. The digits further pushed client holdings to a new record of 1,166 tonnes at $1.0 billion.
As investors worldwide bet on a quick economic recovery, it transfers the pressure into the commodity market. On top of it, silver and platinum are beneficial metals in heavy industries, unlike gold. Both the reasons will further boost silver prices as gold keeps dropping down.
One thing is clear for sure; social media is a powerful tool for shaking the global market. But is it well-directed?
According to Norman, Reddit users and their targets are highly misplaced. He says, “There is a misnomer here that banks are constantly running short positions, but from a price perspective they are neutral. They have a long and a short that cancels each other out.”
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