Silver futures prices and shares of silver miners climbed on Thursday, January 28th trading session after posts in the Reddit’s popular WallStreetBets forum about a “short squeeze” in the notoriously volatile precious metal.
Despite industry analysts suggesting that the price of silver has moved into correction/consolidation mode, silver bulls are not having any of it. The resulting 28% jump in silver prices over the past couple of months is a true testament to what can happen when investors hold their own.
The solid trend in rising silver prices started back in 2019. As consistent as it has been so far, many predict this is not sustainable and a correction is to be expected shortly. As silver futures opened up 7%, surging from $27/oz to a high of $29.095 following a weekend of speculation, many are now bracing for the next big squeeze.
While many investors view these price movements as a standard feature of the market, a more detailed look into the role that regulatory bodies and major players in the face of banks and investment houses may reveal a history of silver price suppression and manipulation.
On December 11th, 2009 The National Inflation Association (NIA) declared silver the best investment for the next decade. Shortly thereafter, Bear Stearns defaulted on the same day silver reached its multi-decade high of over $21 per ounce. In what many saw as blatant silver price manipulation, the Federal Reserve was quite eager to orchestrate a bailout of Bear Stearns immediately before Bear Stearns was forced to cover their silver short position.
As a result, JP Morgan took over the concentrated short position in silver from Bear Stearns, gaining complete control over the paper price of silver. Within weeks, JP Morgan was able to manipulate the price of silver down to below $9 per ounce. NIA believes they were able to drive the price of silver down through "naked short selling," selling paper silver that is unbacked by physical silver.
On February 5th, there was another sharp decline in silver prices. The NIA described it subsequently as being "just a temporary wash out, before a huge surge in silver prices later in 2010." Since then, silver prices have rebounded by 18%. The temporary wash out that occurred on February 5th was predicted by independent metals trader Andrew Maguire, who has long spoken out about banks like JP Morgan limiting gold and silver positions and thus manipulating price and stocks of silver mining companies.
Focusing back on the recent increase in silver prices, as of late we’ve seen incredible demand for silver bullion with many brokers running out of bullion. This is entirely the doing of retail investors and, more specifically, Millennial investors who have been trying to see if group buying can cause a short squeeze among the institutions that are shorting silver. Creating mass movement towards silver stocks and silver as an investment is built, in part, on the fact that the narrative surrounding silver has been manipulated for decades. This is the very basis of the so-called ‘activist investing’ that is the safe force that catapulted GameStop among the ranks of Fortune 500 companies overnight. This same story of ‘us vs. them’ too started out on a popular Reddit forum.
The question on everyone’s minds right now is: How long can silver hold its current rally before institutional players clamp down and try to pigeonhole it again?
So far, we know there is a considerable imbalance between demand and supply for silver. If supply struggles to meet increased demand, there's little to keep silver from soaring at this point. Even if the precious metals market is currently being artificially suppressed by paper gold and silver that doesn't physically exist, the increased interest in silver as a real store of value doesn’t show any signs of stopping.
Stocks of silver mining companies haven’t remained indifferent to this trend. Most recently, stocks of First Majestic Silver have been heavily shorted, while other retail investors are starting to bid up. This scenario is repeating itself with AbraPlata Resources in a trend that goes to show that younger investors are now looking for ways to buy as many assets related to silver as they can find to help drive the price up. So far, retail investors have been able to cause enough of an outflow for physical silver from the metals exchanges to disrupt them. This increase in demand has put a huge strain on supply, creating an interesting situation in which silver’s scarcity is fuelling further interest in the metal. In the coming months, we are about to see the validity of this theory put to the test.
One thing is certain however - no matter what happens with #SilverSqueeze, a lot of younger people are for the first time informing themselves that metals are the only true real money. That realization will likely remain, even when the squeeze ends and it has been a true ‘red pill” moment for many.