Silver’s rollercoaster trading on Reddit-fuelled mania

Vrasidas Neofytou
Head of Investment Research

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The silver market has experienced some rollercoaster rides this week, driven by a Reddit trading frenzy, similar to the retail-driven buying frenzy in heavily shorted shares such as Gamestop and AMC Entertainment.

Spot silver gained 20% in a three-day rally to 30 dollars per ounce, hitting its highest level since 2013. The rally was driven by the furious buying of a group of retail traders, organized on the WallStreetBets Reddit forum and targeting the short squeeze from the hedge funds.

However, the price retreated towards 27 dollars per ounce on Tuesday, following a margin hike on silver futures by the Chicago Mercantile Exchange, and as trading platforms such as Robinhood placed trading restrictions.

Even though the recent rally was driven by non-fundamental reasons, Wall Street analysts have been very bullish on Silver, with an average target price near 30 dollars per ounce in 2021.

The bullish outlook for Silver is based on the robust demand for industrial metals from China, the weaker US dollar, the inventory deficit, and the growing demand from the green energy sector.

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