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Reddit Bandwagon Now Targets Silver

Bloomberg notes Silver Coin Sites Grind to a Halt as Reddit Horde Takes Aim

Retail sites were overwhelmed with demand for silver bars and coins on Sunday, suggesting the Reddit-inspired frenzy that roiled commodities markets last week is spilling over into physical assets.

Sites from Money Metals and SD Bullion to JM Bullion and Apmex, the Walmart of precious metals products in North America, said they were unable to process orders until Asian markets open because of unprecedented demand for silver.

Retail traders, inspired by Reddit posters, stormed into the silver market last week and successfully drove up prices of the physical metal, silver miners and exchange-traded funds. Spot prices, silver futures on the Comex and the largest silver exchange-traded fund, iShares Silver Trust, all climbed more than 5% in the week.

Premiums on American Eagle silver coins have risen to close to $5 from a normal level of $2 over the past three days, according to Everett Millman at Gainesville Coins in Florida. His company’s website has a notice saying orders are taking longer than normal to fulfill.

“That absolutely motivates more people not only to jump on the bandwagon with the Redditors,” Millman said by phone. It also “reinforces the bias that holding physical silver is a safer investment as opposed to speculating on the stock market.”

Overconfident Shorts?

Also consider Reddit Investors Piling Into Silver Drive Up Prices a Second Day

On Thursday, silver miners’ shares spiked and the largest silver exchange-traded fund, iShares Silver Trust, saw a frenzy of options buying after the market emerged as a target on the Reddit forum r/wallstreetbets. The moves “have been extreme in some cases and have had little fundamental justification,” Eugen Weinberg, an analyst at Commerzbank AG, said in a note.

Retail investors who have been swapping tips on such information platforms have caused massive shifts in the prices of some shares,” Weinberg said. “We are confident that the influence of retail investors on silver will not last all that long, and that ultimately industrial and institutional demand will be the key factor in the longer term.”

If there’s another short squeeze, “I think it will be fairly muted,” said Jason Teed, Director of Research at Flexible Plan Investments Ltd. “A short squeeze on a mid-cap stock with heavy short interest is one thing, but the commodity markets are extremely vast.”

Little Fundamental Justification?

There certainly was no "fundamental  justification" for GameStop, Blackberry, Bed Bath & Beyond and dozens of other names that have soared recently on short squeezes.

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That is of course you do not consider short squeezes "fundamental". But justification  or not, look at what happened.

Believe your eyes, not justification theories.

Silver vs Gold Fundamentals

There is a huge difference  between gold and silver.  Gold is not used up. Nearly every ounce ever mined is still readily available in some form. 

Silver, however, is used up in industrial processes that are not easily recovered. There is no huge supply available.  

Thus, I take exception to the generalized notion that "commodity markets are extremely vast.”

Got Silver?

March 2019 appears to be last time there was a net short position on the part of speculators in the white metal, which is, @pboockvar  can tell you, always a great time to play the other side as a contrarian.

Mish