Silver Analysis

Silver Analysis

Bobby Tarantino

Reddit users have done it again. After all, that happened last week with Gamestop shares that rose 1500%, and similar cases such as AMC or Blackberry have generated large losses to funds that were positioned in short. Now it seems that they have set their sights on the commodities market with silver, whose price has had a bullish rally to $30 per ounce; such price had not been reached since 8 years ago in 2013. Platforms and experts from dotbig advise buying, and the precious metal price makes it reach this unusual level.

Wall Street is barely recovering from the scare with the new increase of this metal. Last week the big funds were defeated with more than 20 billion dollars, and the worst, the generalized loss of confidence, in which a dilemma opens about a system that only a few controlled the movements of the markets according to their interests, and there is speculation about a future regulatory change to increase the confidence of investors.

Looking at the chart provided by the DIF Broker platform, the price of silver this last week is booming. Retail investors coordinated through the Wall Street Bets forum have caused this increase in the metal, raising it to 11%. Many of these investors began to consider a genuine possibility of a "short squeeze" as never seen before. This has triggered a bullish trend in funds with high exposure to the precise metals and mining companies' share prices. The increase in the price of silver has dragged down the price of gold but to a lesser extent.

Although its price has suffered a correction with the opening of the day, analysts do not rule out that this will be prolonged over time, and the metal will suffer further rises. It should be remembered that the price of silver reached an all-time high in 2011, reaching almost 50 dollars. With the more than manifest physical shortage of this metal, the market could move upwards as this situation worsens.

Micro-speculation became strong this Monday and provides investment opportunities with revaluations that were not foreseen until a few days ago.

Analysts refer to what has been raised in the forum of requesting physical silver at futures expiration since there is a physical shortage of this metal; generally, the type of expiration that is applied when settling is by differences. There would not be available to deal with this if everyone does it at the same time.

As shown in the graph provided by the Macrotrends of the historical price of silver since 2008, a significant rebound can be observed in the last period, but far from the previously mentioned levels reached in 2011 with its historical maximum. The cause of these increases is produced by the current uncertainty that makes metals resort to metals as a haven.

In the initial period of the pandemic, gold behaved better because it was the most popular safe-haven asset; however, with the news of the vaccine, the situation reversed, and the biggest increase is produced by silver.

Over time, silver has been generating a considerable increase in its price due to the great demand by investors to hedge against the effects of an increase in inflation on their portfolios.

The anomalous behavior in this last period caused by Reddit users, including large investors, millionaires, and influencers, makes it have a mass behavior and increases companies' prices. This new dangerous fashion is a consequence of the severe economic crisis produced by the pandemic. The small investor tries to take revenge on the strong hands that operate quickly due to the generalized thought in this group of how unethical this practice is.

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