Could Redditors Trigger the Silver Squeeze 2.0?

This week, we explore a groundbreaking development in the financial world: one of the most influential names in central banking has revealed a purchase of shares in a Bitcoin ETF, signaling a big shift in the acceptance of digital assets by traditional financial powerhouses.

Additionally, the meme-stock craze appears to be back. Earlier this week, shares of GameStop (GME) and AMC Entertainment (AMC) surged once again, echoing the frenzy of 2021.

We also revisit the “Silver Squeeze” from the same period, where Reddit traders targeted the silver market, aiming to expose alleged manipulation by large financial institutions. We discuss the reasons silver could be ripe for a short squeeze…

But first an update on precious metals:

Silver Climbs to Over $28.50/oz

Silver is continuing its fantastic year, up roughly 20% year to date. This rise is driven by increasing industrial demand, concerns over inflation, and renewed interest from investors seeking safe-haven assets.

Gold Hits Three-Week High

Gold prices reached a three-week high on Wednesday, driven by a weaker dollar and lower yields. The U.S. consumer price index rose less than expected in April, increasing the likelihood of Federal Reserve interest rate cuts.

Silver Demand for Photovoltaics Increased 64% YoY

In 2023, industrial silver demand rose 11%, reaching a new record, as reported by the World Silver Survey 2024. Leading the surge in demand was silver’s usage for photovoltaic applications in solar technology, up 64% from the previous year.

Global Platinum Market Faces Increased Deficit in 2024

Declining mine supplies from South Africa and Russia are projected to create a severe global platinum deficit in 2024, according to the World Platinum Investment Council (WPIC). This shortage marks the second consecutive year of scarcity driven by persistent production challenges.

US Wholesale Inflation Hits Highest Rate in a Year

US wholesale inflation surged to its highest rate in a year in April. According to Bureau of Labor Statistics data released Tuesday, the Producer Price Index (PPI) rose 2.2% year-over-year, outpacing expectations.

In Case You Missed It:

Investment managers are required to file their 13F reports with the SEC, disclosing their equity holdings, and many have reported ahead of the deadline.

Among these filings, one stood out.

Edmond de Rothschild Holding S.A. added $3.6 million, split between Grayscale’s GBTC and BlackRock’s IBIT. The Rothschild family, with a legacy of influence in banking, has been pivotal in controlling the world’s money supply for centuries. By the end of the 19th century, they controlled roughly half the world’s wealth.

This move into digital assets by such a historically significant financial entity suggests a notable shift in how these assets are perceived by some of the world’s most influential financial players.

Meme Stocks Come Roaring Back

When short interest in GameStop rose to 140% of the available shares in January 2021, traders on the “WallStreetBets” Reddit community took note. Thousands piled into the stock igniting a short squeeze, where short sellers were forced to buy shares at higher prices to cover their positions, driving the price up even further.

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.

It appears the meme-stock craze is back. Since May 1st, stocks like GameStop (GME) and AMC Entertainment (AMC) have more than doubled, amid wild price swings. The Wall Street Journal says, “The catalyst for the latest frenzy was a series of posts by an X account linked to meme-stock guru Keith Gill, also known as Roaring Kitty, which previously hadn’t posted since 2021.”

It seems odd that one man posting a picture on X/Twitter could cause the markets to move like this, but when it comes to meme stocks, all bets are off. According to data from S3 Partners LLC, the recent rally in GameStop has cost short-sellers more than $2 billion in just two days.

The Silver Squeeze 2.0?

In 2021, some Reddit traders attempted a similar move in the silver markets, dubbed the “Silver Squeeze.” Many share the belief that the silver market is heavily manipulated by large financial institutions and banks, particularly through short positions. They saw this as an opportunity to challenge and potentially expose this manipulation.

The belief that the physical supply of silver was limited compared to the vast amounts of paper silver (silver derivatives) traded in the market. By purchasing large amounts of physical silver and silver-backed exchange-traded funds (ETFs), they hoped to create a shortage that would drive prices up.

In this instance, a heavily shorted stock (usually held by various hedge funds) is aggressively bought up (in this case, by retail investors), forcing short sellers to exit the market at a loss. This process, known as a short squeeze, can cause the stock’s price to soar dramatically as short sellers scramble to cover their positions at high costs.

Why the Silver Market Could Be Due For a Silver Squeeze

The silver market has several characteristics that make it ripe for a potential squeeze. Here are a some of the most compelling:

Smaller Market Cap: The silver market is significantly smaller than gold’s, with a market cap of $1.6 trillion compared to gold’s $15.8 trillion. This smaller size makes silver more susceptible to price movements from coordinated buying efforts.

High Short Interest: Just like GameStop and AMC during the meme stock craze, the silver market has a high level of short interest. With 18,524,375 shares of the iShares Silver Trust (SLV) shorted, millions have placed their bets against silver. If retail investors target these short positions, it could trigger a short squeeze.

Physical Supply Constraints: The physical supply of silver is limited compared to the vast amounts of paper silver (derivatives) traded in the market. A concerted effort to buy physical silver could create a supply shortage, pushing prices higher.

Industrial Demand: Silver is not only a precious metal but also an industrial one, used in electronics, solar panels, and other technologies. Increasing industrial demand coupled with supply constraints could amplify the effects of a squeeze.

Historical Precedent: The 2021 “Silver Squeeze” attempt by Reddit traders highlighted the potential for retail investors to impact the silver market. Renewed interest and coordinated efforts could reignite this movement.

Inflation Hedge: Silver, being both a precious metal and industrial commodity, is seen as a hedge against inflation. Because silver has a lower price point, many retail investors perceive it as a more accessible inflation hedge than gold.

Market Manipulation Beliefs: Many believe that the silver market is heavily manipulated by large financial institutions through short positions. Efforts to expose and counteract this manipulation could lead to increased buying activity.

Social Media Influence: The power of social media platforms like Reddit cannot be underestimated. Retail investors can quickly mobilize and coordinate their actions, creating significant market movements.

Theoretically, a squeeze would be more likely to occur in silver versus gold. If you’re looking for an easy way to get started in silver, InstaVault Silver could be the fastest and most cost-effective way to invest in physical silver.