Reasons of Silver Price. Table of Contents

4-reasons-why-the-price-of-Silver-remains-below-$30

4 Reasons Why Silver Remained Below $30

Traders tried to repeat the GameStop story in the silver market, but failed because:

  1. The silver market is big and liquid.
  2. The silver squeeze wasn’t as coordinated as the GameStop one.
  3. Posts calling to “stop buying silver” got more viral than the original silver squeeze posts on Reddit.
  4. The stock market is different from the silver market in terms of dynamics and fundamentals.

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Why did the short squeeze fail with silver?

When small investors tried to play with silver as they played with GameStop stocks, they failed and the rally didn’t even last for two days.

They succeeded in pushing silver prices up to $30 an ounce, but it didn’t hold and fell the next day.

Short sellers have to buy stocks to cover their losses when the prices of the stocks they sold rise instead of falling.

As a result, the prices get even higher.

This is called a ‘short squeeze’. For it to succeed, some conditions must be met:

  1. The news should spread like wildfire among investors on a large scale.
  2. High returns in a short time.
  3. Limited supply.
  4. An active options market. Unfortunately, these principles aren’t available in the silver market in a way that allows investors to squeeze the metal’s price in a short time (several days), like when there are a supply shortage and high demand for a stock.
  1. The silver market is liquid and larger, which is completely different from the GameStop stock game triggered by amateur and retail investors on “WallStreetbets” on (Reddit).
  2. The Silver Squeeze movement wasn’t as coordinated and organized as the GameStop one. Many Reddit investors described it as a distraction from their GameStop campaign.
  3. Investors wrote posts about silver under the call “Stop Buying Silver”. These posts spread faster and were seen more often than the original posts about buying silver on Reddit.
  4. Silver is a real asset, while GameStop stocks are a fake asset. The stock market differs dynamically and fundamentally from the silver market. The silver industry is valued at $108 billion, while GameStop shares are likely to be worth only $4.4 million.
  5. One of the main differences is that silver is not an Exchange-Traded Fund – ETF. Real silver metal cannot be created, bought, sold, and redeemed at will.
  6. People who chased GameStop stocks are amateur investors. Those aren’t investors – they are gamblers and speculators. Silver has an industrial component that is included in many sectors such as technology equipment, clean energy, and cars. That strokes the desire of heavy industrial companies, such as Tesla, Sony, and Toshiba, to keep silver prices low. Therefore, the silver price manipulation movement failed as it is a competition between amateurs and market whales on Wall Street.

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Why did small investors target Silver in the first place?

  1. Silver has already begun to attract people’s attention on a larger scale, even before the #SilverSqueeze movement triggered by WallStreetBets investors.
  2. Although this new interest won’t immediately translate into higher prices, its impact will appear in the medium and long terms. Silver has the potential to outperform gold as industrial demand recovers.
  3. Silver attracts a wider audience because it is more cost-effective than gold, and people also understand silver better, according to HSBC chief precious metals analyst.
  4. Investors are returning to silver. Analysts believe that silver will exceed $30 this year, with or without the support of social media investors, according to Standard Chartered.
  5. Silver is the metal of the future. The trend towards clean green energy is a long-term game for silver. It will ultimately affect silver’s prices positively.

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Silver during last week

Last Monday (February 1), silver jumped more than 8% above the stubborn resistance level of $30 an ounce, reaching its highest level in eight years (February 2013) amidst the support of retail and amateur investors.

However, the squeeze wave on silver didn’t hold for long, and it lost most of the gains and momentum during the following trading session.

Silver dropped by more than 5% to $26 after restrictions imposed by the (CME) to raise margins on silver futures by 18%.

Silver rose a little later and ended the week at $27.15.

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