Are Tariff Worries Setting Us Up for a Potential Squeeze in the Gold and Silver Markets?

Jesse Colombo is a financial analyst and investor writing on macro-economics and precious metals markets. Recognized by The Times of London, he has built a reputation for warning about economic bubbles and future financial crises. An advocate for free markets and sound money, Colombo was also named one of LinkedIn’s Top Voices in Economy & Finance. Silver prices recorded two consecutive weeks of gains on Friday, following two back-to-back weeks of losses.

• These individual investors are characterized by the desire for high gains and the willingness to take on a high degree of risk.
• When people realize how poor a store of value cash and bonds have become, just as in the 1970s, they’ll flood into precious metals.
• Trading volumes in silver futures soared as both speculative traders and hedgers adjusted their positions in response to the changing market dynamics.
• Regulatory responses to the Silversqueeze underscored the need for updated oversight and potential reforms to address the challenges posed by new forms of market participation.
• The inflation-adjusted highs from the 1970s would equate to over $200/oz today, and I believe we’ll not only test but exceed those levels.
• The narrative of “David vs. Goliath” resonated with many participants, fueling their determination to drive up silver prices and expose vulnerabilities in the market.
• In the long term, the Silversqueeze episode could lead to a more informed and cautious approach to commodity trading among both retail and institutional investors.

Scope For Short Squeeze

They have claimed that a handful of commercial COMEX traders are holding a large short position that far exceeds the amount of physical silver they actually possess. This situation has been allowed to continue since most traders who purchase futures contracts choose to settle for cash and rarely take delivery of the actual metal. Allegedly, this can create the false impression that there is an abundance of silver, while in fact, it is in short supply. Unfortunately, the silver market is quite opaque, and we have no way of knowing whether these allegations are true or not.

The term “Silversqueeze” emerged in early 2021, describing the phenomenon where a large group of retail investors, largely coordinated through social media platforms like Reddit, sought to drive up the price of silver. This collective effort was inspired by the success Elliott waves indicator of a similar movement that targeted GameStop’s stock, and it aimed to challenge the dominance of institutional investors who held significant short positions in silver. The resulting surge in demand for silver had profound impacts on the market, influencing prices, supply chains, investor behavior, and regulatory responses. This article delves deeper into each of these areas to explore the multifaceted consequences of the Silversqueeze.

This doesn’t mean manipulation isn’t taking place, though, and the saga of the Hunt brothers proves this is something that can happen. And even if you were to ignore all these facts, it’s impossible to overlook the dwindling supply of silver. Because of these decreases, many people called it history’s “greatest theft in the silver market.” The raid that found its roots in WallStreetSilver intended to push back against price manipulation. Gamestop and AMC certainly dominated news in the investing world during the first half of 2021. If you paid attention to what was happening on Reddit, though, you likely also heard of WallStreetSilver and the silver squeeze.

The experience from the Silversqueeze could prompt market participants to rethink their strategies and prepare for similar disruptions in the future. The story of silver price suppression by major financial institutions reads like a financial thriller, yet it’s documented fact https://www.forex-reviews.org/ rather than fiction. For decades, a small group of powerful banks has maintained massive short positions in silver, effectively acting as a cartel to control and suppress prices. This isn’t conspiracy theory – it’s evidenced by multiple regulatory investigations, lawsuits, and eventual settlements.

Are We in a Silver Short Squeeze?

Even if there were no underlying “bad acts” on February 2, 2021, the Hunt brothers have already proven that the government and heads of exchanges can change rules when they want to. Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver. In response to the Silversqueeze, regulatory bodies around the world began to scrutinize market activities and the role of social media in influencing trading behavior.

Trade Wars Move Markets

The idea behind WallStreetSilver is that the precious metal is seriously undervalued due to market manipulation. In the minds of many, though, purchasing large supplies of silver could rectify this. Doing so would drive up demand, limit supply and thus make price manipulation more difficult.

The Supply Squeeze

Last week, about 920 million shares of the company traded in the U.S. alone, and the stock exploded to $483/share. In early January, the stock was trading below $25, a handsome gain of up to 1832%. But many of his followers didn’t buy stock in the open market, they bought leveraged call options that made them a lot more money. When the price of a stock, asset, or commodity rises especially quickly, it can trigger what’s called a short squeeze.

• Jesse has been writing an online column for Forbes since 2013 and is the Director of Marketing, North America at BullionStar — one of Asia’s premier gold and silver bullion dealers that is now entering the U.S. market.
• But this time, with silver’s critical industrial role and the structural supply deficit, the upside could be truly historic.
• The Hunt brothers faced charges from the IRS and CFTC for their efforts to corner the silver market and trigger a silver short squeeze.
• For instance, GameStop’s market cap was $1.4 billion in mid-January, but this increased 16 times over when Reddit traders started to talk up the stock.
• A significant portion of Friday’s silver buying volume was likely driven by short-covering.
• The French learned this lesson the hard way when silver left their country and their currency was no longer backed – leading to economic chaos.

Silver Prices

According to some estimates, this has cost Wall Street firms up to 70 billion dollars and almost bankrupted a prominent hedge fund called Melvin Capital. This victory gained the WallStreetBets forum instant fame and inspired others to try and do the same. Thousands of young investors are meeting up on internet forums to share information and coordinate their financial plans and actions. For the first time in history, retail investors are not acting independently, but as an organized group. This allows them to concentrate their positions and influence the stock market like never before.

Silver’s breakout on Friday marks a pivotal moment in its ongoing bull market, confirming many of the key conditions I’ve been highlighting for weeks. With silver decisively closing above the critical $32.50 resistance level and surging on high volume, the stage is set for a powerful rally. limefx The technical and fundamental drivers behind silver are aligning, from the breakdown in the gold-to-silver ratio to surging demand and shrinking supply.

Contrary to the rumblings of some analysts in the precious metals space, there is little reason to suspect that we are currently experiencing a silver short squeeze. In order for the market to trigger a short squeeze, the price of silver would have to climb quickly and considerably. Like the Redditors who attempted to trigger a silver short squeeze in 2021 rightly pointed out, silver is a commonly shorted commodity, making it prime for a short squeeze in the right market conditions. Institutional investors and market analysts were forced to take notice of the retail investor wave, leading to increased scrutiny of short-selling practices and the role of large financial institutions in commodity markets. The movement also brought attention to the mechanics of the silver market, including the interplay between physical and paper markets and the potential for price discrepancies. This newfound awareness could lead to lasting changes in how investors approach commodity trading and perceive market dynamics.

Finally, after they’ve positioned themselves net long via the futures market they let the price rip. The price of copper is an often overlooked factor in silver’s performance and rivals the influence of gold. The index closely mirrors silver’s price movements, yet surprisingly, silver’s price itself isn’t even an input! Although the Synthetic Silver Price Index didn’t break out on Friday, it still posted a solid 1.21% gain. Given the sheer strength of silver’s breakout, I’m choosing to overlook this criterion for now.