The frantic price swings last week in stocks like AMC Entertainment and GameStop, led by retail traders aiming to take on Wall Street, have spread to a new target: silver. The price of the precious metal jumped 10 percent on Monday to the highest in eight years after online calls to create a “silver squeeze.”
The attraction to silver came as the S&P 500 index appeared poised to open higher, following gains on European and Asian stock markets. Retail websites for buying silver coins and bars said they were experiencing unprecedented demand and there would be delays in shipping orders.
Moneymetals.com, a dealer in precious metals, said it was not taking any new silver orders until midmorning Monday and put some restrictions on gold purchases as well. The iShares Silver Trust, a large BlackRock exchange-traded product tracking the metal, reported record net inflows on Friday of $944 million.
Shares in companies that mine for silver surged higher too. Fresnillo rose 19 percent and Polymetal International was up 7 percent, the two biggest gainers on the FTSE 100 index in Britain. But the silver market is fundamentally different than that of beleaguered companies like AMC and GameStop.
The company stocks that caught the attention of the army of day traders over the past week, spurred on by memes on Reddit, had been unloved by hedge funds. By driving the price of these stocks higher, the traders “squeezed” the firms holding short positions.
Melvin Capital Management, one of the hedge funds that bet GameStop shares would fall, lost 53 percent on its portfolio in January, a person familiar with the matter said. Short sellers lose money when a company’s shares rise, and the losses are potentially limitless.
Silver prices had already been rising before the recent interest, and some users on Reddit have warned against a “silver squeeze,” saying it would benefit the same hedge funds and investors they toppled last week. Also, silver is a much bigger and deeper market, making it harder to influence.
The price of silver climbed nearly 50 percent last year, and some institutional investors expected it to outperform gold this year. Still, the traders, who appear to be mostly small investors focused only on a handful of stocks and assets, have emerged as a new risk factor for the large firms betting against stocks and regulators concerned about the smooth functioning of markets.
Futures indicated indexes on Wall Street would open higher on Monday. The S&P 500 index was set to gain nearly 1 percent, after it lost more than 3 percent last week — its worst week since late October.
GameStop’s shares rose about 7 percent in premarket trading, having gained 400 percent last week and over 1,600 percent in January. Another target of the trading frenzy, AMC, rose 25 percent in premarket trading and was one of the most traded shares. It gained about 280 percent last week.