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Silver Steadies After Wild Swings as Reddit-Fueled Furor Eases

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Eddie Spence and Yvonne Yue Li
·3 min read
Silver Steadies After Wild Swings as Reddit-Fueled Furor Eases
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(Bloomberg) -- Silver climbed after the biggest loss since August, with markets steadying from the Reddit-fueled turmoil that whipsawed prices this week.

Futures rose less than 2% on Wednesday following a turbulent two days as an investor stampede into the metal gave way to swift exits. Silver’s emergence last week as a focus of a retail-investor buying binge helped push prices to an almost eight-year high on Monday, before a 10% tumble on Tuesday as CME Group jacked up margin requirements.

Posts on Reddit’s WallStreetBets forum had initially called for a “short squeeze” of silver, with prices pushing higher and options trading surging. But sentiment has now turned with users speculating that supporting posts may be part of a pump-and-dump scheme -- or that hedge funds infiltrated the board. Tuesday’s slump in silver came alongside a plunge in shares of GameStop Corp. and AMC Entertainment Holdings Inc., two other popular trades.

“We think this so-called short-squeeze by the Redditors is over,” said Commerzbank AG analyst Daniel Briesemann. “The silver market is just too big and too liquid. This attack was not successful. Silver has shed $3 from its high on Friday. And we think that the remaining gains will also be gone in due course.”

Silver futures for March delivery climbed 1.8% to settle at $26.889 an ounce at 1:25 p.m. on the Comex in New York. Spot prices rose 0.3%. Gold for immediate delivery was down 0.2%, while palladium and platinum advanced. The iShares Silver Trust, a target of retail traders on Reddit last week, rose 1.3% after falling more than 8% on Tuesday.

“Silver is outperforming gold today on short-covering after the recent dislocation,” said Tai Wong, head of metals derivatives trading at BMO Capital Markets. “Volumes are back to normal after the recent tumult.”

The wild swings in financial markets have come under scrutiny. Treasury Secretary Janet Yellen has summoned U.S. regulators, including the Commodity Futures Trading Commission, to discuss recent volatility, in her first public effort to address the tumult involving GameStop shares and broker-dealer Robinhood Markets Inc. The CFTC has previously said it’s closely monitoring activity in silver.

“Silver’s strong reaction to the margin increase suggests that the Reddit-rally was primarily driven by short-term speculators which have exited the market again, rather than longer-term investors,” said Carsten Menke, an analyst at Julius Baer Group Ltd.

The exchange-traded fund at the center of the recent surge posted yet another record inflow on Tuesday. The iShares Silver Trust has now added more than $3 billion since late last week.

Even as the intensity of market moves eased, buying interest remains. The U.S. Mint said it’s still rationing sales of silver coins because of “exceptional market demand,” as well as limited supplies and manufacturing capacity. In Australia, the Perth Mint has also seen strong demand, with some clients selling gold to buy silver, according to Chief Executive Officer Richard Hayes.

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