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International

Silver surges as Reddit army turn to commodities

Silver prices leapt to a five-month high on Monday on social media calls to buy the metal and emulate the frenzy that drove up GameStop shares.

Shares in a handful of smaller Australian mining firms surged as small-time traders bought en masse.

Argent Minerals, Boab Metals and Investigator Resources leapt more than 15%.

Coin-selling websites also reported unprecedented demand and flagged delays in delivering silver.

Silver rose as much as 7% to $28.99 an ounce, its highest value since mid-August.

The moves are the latest example of small-time traders buying stocks and other assets that large Wall Street funds bet against, resulting in large losses for major investors.

Some users in the Reddit forum Wallstreetbets argued that silver is a heavily manipulated market, and a surge in the silver price could hurt large Wall Street players.

"Think about the Gainz. If you don't care about the gains, think about the banks like JP MORGAN you'd be destroying along the way," said Reddit user RocketBoomGo, in a widely circulated post.

Some members of the forum have argued against the move, suggesting it would benefit the same funds that stood to benefit from betting against GameStop.

The recent GameStop surge, which was also fuelled by retail investors, was also seen as a revolt against large institutional investors.

Unlike GameStop, which was a loss-making gaming retailer that many investment funds had bet against, Silver has seen strong growth over the past year.

"There is this curious situation now where the Reddit crowd has turned its sights on a bigger whale in terms of trying to catalyse something of a short squeeze in the silver market," said Kyle Rodda, an analyst at brokerage IG Markets in Melbourne.

"There's a lot of commentary on these platforms to pile in to the miners."

Silver prices are up 15% since Wednesday's close, around the time when messages began circulating on forums such as Reddit encouraging users to buy the metal and drive up prices.

Massive losses for Melvin

The latest surge comes as the damage to one Wall Street firm becomes clearer.

Hedge fund Melvin Capital lost 53% in January, according to media reports.

However, the firm received commitments for fresh cash from investors in the last days of January, and ended the month with $8bn (£5.8bn) in assets after having started the year with roughly $12.5bn, according to Reuters.

The firm had bet that ailing video game retailer GameStop's stock, which traded at less than $5 five months ago, would fall further.

But retail investors, comparing notes on social media platform Reddit, bought the stock and sent it higher to close at $325 on Friday.

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DISCLAIMER: The Views, Comments, Opinions, Contributions and Statements made by Readers and Contributors on this platform do not necessarily represent the views or policy of Multimedia Group Limited.