Global stocks jump as retail investors shift focus to silver after a massive short-seller squeeze

Global stocks jump as retail investors shift focus to silver after a massive short-seller squeeze
Johannes Eisele/AFP/Getty Images
  • Global stocks jumped on Monday as the retail investor army turned a new darling asset: silver.
  • The world's largest silver-backed ETF posted a record $1 billion in inflows as of Friday, the FT reported.
  • Silver surfers sent London's benchmark index and UK mining stocks higher on the new short-squeeze.

Global shares rose on Monday as retail investors shifted focus to the silver market, showing that the Reddit frenzy has spread from stocks and cryptocurrencies to precious metals.

The S&P 500, Dow Jones, and Nasdaq rose between 0.8% and 1%, suggesting a higher open for US market indices later in the day.

On Sunday, a group of 10 Republican Senators proposed an alternative economic plan worth $600 billion compared to President Joe Biden's $1.9 trillion relief plan. Although the GOP's latest proposal is much smaller than Biden's, markets reacted positively as it suggests talks could get moving again.

Silver jumped almost 12% on Monday, from just below $25 to over $30, its highest since last August, as the world's largest silver-backed ETF, the i-Shares Silver Trust, posted a record $1 billion in inflows as of Friday, according to the Financial Times.

"While it is far more difficult to move this market compared to smaller stocks like GameStop, last week's events showed that the impact of the retail frenzy should not be underestimated," said Milan Cutkovic, market analyst at AxiCorp.


The impact of the r/wallstreetbets movement caused immense volatility in US markets last week, making short-sellers anticipate further explosion in nostalgia stocks. Volatility was driven by market positioning rather than worries over growth, according to Mark Haefele, chief investment officer, UBS Global Wealth Management.

Read More: Bank of America warns of 3 looming catalysts that could send the bull market crashing in 2021 - and shares how to position for the 'big change' as the WallStreetBets crowd fights against the system

"There is little doubt that huge central bank liquidity and government stimulus checks in the hands of the underemployed/furloughed (through no fault of their own) retail investors will be a big part of this bubble story," said Jim Reid, a managing director of cross-asset research at Deutsche Bank.

Silver bulls began to impact prices elsewhere, sending London's benchmark index and mining stocks higher as a result.

The UK's FTSE 100 rose 0.8%, the Euro Stoxx 50 rose 1.3%, and Germany's DAX rose 1.4%. Miners Glencore and Anglo American, the frontrunner stocks, rose 3% and 2.7% respectively.


However, Connor Campbell, a financial analyst at SpreadEx noted there is speculation that Reddit isn't necessarily behind the latest move.

"Though there are pro-silver posts on WallStreetBets, the 'top post' on the subject is against the trade, claiming that by 'going long on silver, you would be directly putting money into the pockets of the EXACT HEDGE FUNDS ON THE OTHER SIDE OF $GME'," he said. "The same poster also stated that the short squeeze was 'a hedge-fund co-ordinated attack so they can keep fighting the $GME fight'."

Elsewhere in Asia, China posted a drop in a key business activity index as the resurgence of coronavirus impacted overall sentiment. The lower Purchasing Managers Index suggests the momentum has slowed for now, although the pan-Asian recovery retains its upward trajectory, said Jeffrey Halley, a senior market analyst at OANDA.

China's Shanghai Composite rose 0.6%, Japan's Nikkei rose 1.5%, and Hong Kong's Hang Seng rose 2%.

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