After the frantic price swings of companies like GameStop and AMC Entertainment tantalized the financial world last week, everyone wondered what the army of internet investors would set its sights on next.
The answer, at least briefly, seemed to be silver.
Over the weekend, the precious metal experienced a surge of interest along with an uptick in online chatter about the chances for generating the kind of price spike that grabbed the world’s attention last week.
On Monday, the price of silver jumped as much as 11.5 percent in early trading — to the highest level in eight years — but gravity soon took hold, pulling it back down as efforts to rally users of Reddit’s influential Wall Street Bets forum failed to take hold.
By midmorning, silver had given up some of its early gains, and at 3 p.m., the price was $29.418 per ounce, a 9 percent increase. That was still around its highest level since early 2013.
On Wall Street Bets, where users have overwhelmingly backed GameStop and put pressure on hedge funds, some users dismissed the nascent online crusade for silver as a way to rob the GameStop rally of its momentum.
Some posters described it as a trap set by hedge funds that are losing money on the rise of GameStop, and urged their fellow traders to keep their attention on firms that had shorted shares of the video-game retailer.
- Shares in GameStop, the video game retailer, have soared because amateur investors, starting on Reddit, have bet heavily on shares of the company.
- The wave gained momentum in response to large hedge funds short selling GameStop stock — basically they were betting against the company’s success.
- The sudden demand has driven up the share price from less than $20 in December to around $300 on Monday. On paper, anyway.
- It’s not just GameStop. Amateur investors have backed other companies that many big investors had shunned, such as AMC and BlackBerry.
- This bubble around GameStop forced big investors to raise money to cover their losses, or dump shares of other companies.
One retail investor, Randi Mailloux of Westfield, Mass., said she believed that Wall Street firms were behind the push into silver. A self-described Wall Street Bets lurker, she said big hedge funds “are trying to get people to lose interest in GameStop, sell their shares and move on to something else.”
Just as regulators have been closely watching the activity in GameStop and other stocks, the Commodity Futures Trading Commission said it was keeping an eye on silver. The acting chairman, Rostin Behnam, said the commission was coordinating with other regulators and the commodities exchanges to “address any potential threats to the integrity of the derivatives markets for silver, and remains vigilant in surveilling these markets for fraud and manipulation.”
Last week’s surge in trading of a few stocks — including GameStop, AMC and BlackBerry — rocked Wall Street and forced popular trading platforms like Robinhood to curb trading. The rising prices hammered hedge fund short-sellers and unnerved the markets in general, pushing the S&P 500 into the red for the month of January.
But the skepticism of the recent online hype for silver isn’t the only reason it could be an unlikely candidate to replicate GameStop’s remarkable run.
The silver market is different from that for beleaguered companies that have caught the attention of day traders spurred on by memes on Reddit. Those stocks had been targeted by hedge funds that were betting on declining prices; by driving them higher instead, the traders “squeezed” the firms holding short positions, forcing them to buy the shares.
The price of silver, on the other hand, had been rising even before the recent interest. It climbed nearly 50 percent last year, and some institutional investors expected silver to outperform gold this year.
Silver is a much bigger market, so it is harder for a relatively small group of traders to influence. And then there’s a logistical hurdle of commodities trading: Retail investors hoping to drive up the price of silver would have to take delivery of the metal, instead of buying up shares in online accounts or purchasing options contracts.
The silver market has had restrictions on overly speculative behavior since the early 1980s, after the failed attempt by Nelson and William Hunt — brothers who were heirs to an oil fortune — to corner it. They amassed roughly half the world’s tradable supply of silver before the gambit imploded on March 27, 1980, after market regulators stepped in and restricted further purchases. The metal fell from a recent high of $50.35 to $10.80 an ounce, costing the Hunts $1 billion in losses, according to estimates.
But the online skepticism that greeted Monday’s rally didn’t help.
“It’s sketchy,” Ms. Mailloux said. “Someone created a story about silver at the moment that the Wall Street Bets guys were about to pull this short squeeze.”
Still, there was a tangible effect from the increased online interest. Shares in companies that mine for silver rose. Fresnillo closed up 9 percent, though also well below its highest point of the day, and Polymetal International was up 5 percent. Both were among the biggest gainers on the FTSE 100 index in Britain. On the New York Stock Exchange, Silvercorp Metals rose 15 percent and Fortuna Silver Mines 12 percent.
Retail websites for buying silver coins and bars said that they were experiencing high demand and that there would be delays in shipping orders.
The iShares Silver Trust, a large BlackRock exchange-traded product tracking the metal, reported record net inflow on Friday of $944 million, which required it to buy 34 million ounces of silver.
The retail buying binge elevated prices more than analysts had expected.
“The frenzy of retail buying has re-based silver prices higher for the time being,” analysts with JPMorgan Chase wrote on Monday.
Some dealers said they were having a hard time keeping up with demand.
Moneymetals.com said it was not taking new orders on most of its silver products on Monday and put some restrictions on gold purchases as well. Another dealer, APMEX, said it had experienced a surge of new customers over the weekend.
“We have made strategic decisions to procure additional metal, locking up any metal we can find in the marketplace,” Ken Lewis, APMEX’s chief executive, said in a statement on the company’s website. “We suspect premiums will rise and rise quickly, as we are seeing significant increases in our costs, when we can even locate the metal.”
Gillian Friedman contributed reporting.