Silver - Far From the Maddening Crowd

We were tempted to resist talking about the Reddit phenomenon but why not wade in, particularly now as we stand amongst the smoking ruins of the dreams of silver bugs, planet-wide, who thought all their Christmases had come at once.

Sweeping in from nowhere the idea that the Gamestop surge could be leveraged to create a short squeeze in silver became the obsession of silver bugs over the last weekend of January. Just as a bunch of Millennials seized the initiative from the hated hedgies of Midtown Manhattan and Greenwich Connecticut, so the greybeards of the Tinfoil hat fraternity convinced themselves that Millennials would ride to the rescue of silver.

Accordingly the veterans invaded Reddit's Wallsteetbets sub-reddit and started egging each other on. They took what was the usual silver bull's echo chamber on mining-dedicated sites, that usually dwell in isolation, and inserted themselves into the moshpit inhabited by fans of Gamestop, Blackberry and AMC. The slight problem with this was the silver putsch ended up just being a sub-echo-chamber of a sub-reddit. "To the Moon, Alice" became their mantra and they expected the enthused hordes of gamers and nerds to follow them like lemmings, throwing their collective "weight" into the fray against the Satanic Mills of Wall Street.

The waters were slightly muddied when, in the days before the silver bugs planned to launch their Blitzkrieg, the management at their favorite trading app, Robinhood, instituted trading bans on several of the key playing pieces (such as GME and AMC) of the Reddit hordes. Indeed for some of the shiny metal's enthusiasts having a ban on trading of SLV, would have been almost a Red Badge of Courage.

Banks briefly trembled in their boots. Some of the more canny pointed out though that the Citadel they hoped to storm actually owned a truckload of SLV (cunning devils that they are) and were destined to make a fortune if #silversqueeze became more than a hashtag. How can the evil hedgies actually be long a stock that one hoped to ramp? This did not match the dialectic du jour.

Christopher Ecclestone, founder of research firm Hallgarten & Co. Credit: Christopher Ecclestone

Alas, after 24 hours of frenzied battle across the sub-reddit and Twitter (that resembled Hobbits and other assorted wildlife of the Lord of the Rings charging into action) the battleground went curiously silent. Silver's warriors turned around hoping to see behind them nerds brandishing their keyboards and chequebooks and instead found themselves curiously alone amongst their faded dreams of US$100 per ounce silver and ComEx brokers raining down from the skies. Twas not to be.

While we love silver and like the silver ETF (SLV) we were braced to push the sell button if silver had managed to stay above US$30 per oz. for more than the twinkling of an eye. Alas, it was not to be. The collective groan of the rampers as their gambit failed echoed around global markets then the non-committed pulled the Ejector Seat handle all at once and silver plunged back to where it had started.

We have never subscribed to the sinister theories of the Tin-foil hat brigade because we just couldn't work out why the evil powers-that-be would be interested in pushing silver down, and moreover suppressing it for so long at such a cost of time and effort. Why? It appears to be some convoluted theory that if they can suppress silver then they can hobble gold and thus keep the Great Unwashed from realising that the fiat currencies are being debased by inflation on a daily basis.

Hello...the public worked that out years ago if you only care to listen to them moaning in the supermarket aisles. The evidence of their disdain for holding cash (or precious metals) is the Cargo Cult of property, not precious metals.

That is where they look for their store of value. Governments, such as those in Australia the U.K. and Canada, are the High Priests of the property Cargo Cult, daily offering prayers that property never gets affordable enough for the children of the Great Washed (and Unwashed), i.e. Redditers, to be able to own a place to live, as that would run contrary to the interests of their Boomer voter bases.

When it comes down to it, the Chairman of the Fed does not roll out of bed every morning, check his screen (unlike so many in the mining fraternity) and bemoan the price of silver. Frankly, my dear, he does not give a damn.

-Christopher Ecclestone is the founder of research firm Hallgarten & Co. in London, where he is a principal and mining strategist. Prior to setting up Hallgarten in 2003, he founded and headed the Buenos Aires Trust Company, an Argentine equity research firm, where he worked from 1991 until 2001.