Commodities & Metals

Is Silver the Next GameStop?

Retail investors beating up on short sellers of GameStop shares is so yesterday. The action Monday morning was in silver. Futures in the poor man’s gold jumped above $30 an ounce in early trading, adding more than 12% to Friday’s close of $29.91 to reach a new 52-week high of $30.35.

It’s worth noting that last year was not so bad for silver either. In 2020, gold futures rose by about 25%, more than double the 11.5% improvement in platinum prices, but barely more than half the 47.8% gain in silver prices.

Demand from retail investors for silver coins and bars has nearly emptied the vaults of physical silver, according to a Bloomberg report. Tyler Wall, CEO of SD Bullion, told Bloomberg TV, “Currently we’re seeing the premium — the price you pay over spot to get actual physical silver in your hands — is skyrocketing. Most stuff on our website’s at least 30% over spot and we can’t source it for much less than that right now from our wholesalers.”

Demand has jumped as well for silver mining stocks and exchange-traded funds. The iShares Silver Trust (NYSEARCA: SLV) closed at $24.99 on Friday and traded up about 10% at $27.48 in Monday’s premarket session. The ProShares UltraShort Silver ETF (NYSEARCA: ZSL) traded down about 21% Monday at $5.00, after closing at $6.34 on Friday. ProShares UltraShort Silver’s market cap on Friday was just under $29 million compared to iShares Silver Trust’s valuation of $14.8 billion.

Silver mining stocks are jumping as well. Coeur Mining Inc. (NYSE: CDE) traded up more than 30% in Monday’s premarket at $11.89, while Hecla Mining Co. (NYSE: HL) traded up more than 21% at $6.90. Fortuna Silver Mines Inc. (NYSE: FSM) traded up 22% at $9.51, and Pan American Silver Corp. (NASDAQ: PAAS) was up nearly 14% at $36.94, after adding nearly 4% on Friday.

The difference between the attack on short sellers of GameStop stock and the new push into silver appears, for now, to be a lack of unanimity among r/wallstreetbets investors. One side is pushing for more investment in silver while the other is essentially declaring the run-up to be a false-flag operation, perhaps the work of Citadel Advisors, one of the hedge funds that bailed out investment app Robinhood when clearinghouses demanded more cash to cover the massive one-sided bets the app’s users placed on GameStop stock.

In Citadel’s latest 13-F filing (for the third quarter of 2020), the firm reports positions in the ETFMG Prime Junior Silver Miners ETF (NYSEARCA: SILJ), the iShares MSCI Global Silver and Metals Miners ETF (NYSEARCA: SLVP) and ProShares Ultra Silver (NYSEARCA: AGQ). All these funds are long silver, and rising silver prices would be in Citadel’s best interest. In addition, the company owns shares and options in several silver mining stocks.

Citadel also owned some 37.75 million call options and 21.56 million put options acquired for an average price of around $21.60. The firm reported that it owned just over 6 million shares acquired for the same price.

Whether retail investors’ push for silver futures and for silver-related stocks is authentic or a false-flag is something that r/wallstreetbets users can and will argue over for a while before moving on. Whichever it turns out to be, one thing is for sure: the price of silver was headed higher again Monday.

Just after the opening bell, silver mining stocks were up anywhere between 11% and 44%. The Ultrashort ZSL was down by more than 22%, and the futures price for silver is once again within pennies of $30, up more than 11%.