During the last week of January, investors on social media platform Reddit appeared to have created a short sale opportunity with GameStop, AMC and other shorted stocks. Now, it appears that something similar may be happening to silver - an effect many on Twitter are referring to as the #SilverSqueeze. If the “get rich quick” appeal of last week’s GameStop stock showdown has you wondering if you should be invested in another trending topic like silver, we’ve gathered some food for thought below.
A Recap of What’s Happening Right Now
Early in the trading hours on Feb. 1 shares of silver ETFs like SLV and SIVR rose 11 percent to about $30 an ounce. Others like SLVP and SIL advanced even higher, rising about 50 percent by mid-morning.1 And while all eyes have been on silver as of late, it appears the rally began even earlier with silver prices gaining six percent last week - reaching an eight-year high.2
Is Silver the New GameStop?
Now that’s a question few of us ever thought we’d be asking ourselves. While no one can predict what will happen in the coming days, it appears as though the rise in silver is not paralleling what we saw happen to shares of GameStop at the end of January.
Director of Research of ETF Trends and ETF Database Dave Nadig said on Feb. 1 in a tweet, “Until there’s a disconnect, this feels like “just” a demand surge (still important, but there’s a difference between ‘up 10%’ and ‘up 1200%’).”3 It’s likely the 10 percent is referencing the rise in silver, while the latter is referring to GameStop and other affected shorted stocks.
Keep in mind that silver is a commodity, much like gold, oil, coffee, wheat or cotton. It’s a physical product that is used by manufacturers to produce a physical good. There is a “spot” market for today’s price, but manufacturers often use “forward” contracts that allow them to set a settlement price at a predetermined date in the future.
As an Investor, What Should You Do?
With these market trends all over the news in recent weeks, this is an ideal time to remind ourselves of the importance of “staying the course.”
Shares rise, shares fall. The more extreme of a swing in either direction, the more emotionally impactful it can feel to investors. Compound this with an inundation of news everywhere, and it can leave investors feeling confused, fearful, excited - even a mix of all three.
Before making any sudden movements regarding your current investment approach, you should consider checking in with your investment advisor or financial planner. Your trusted financial professional knows you, your current financial standings and your long-term goals. This puts them in a position to help an individual investor like you make investment decisions than, say, online commentators, news outlets or a friend who made it big on GameStop last week. Together, you can discuss whether or not trending investments, like silver futures, may be in line with your larger financial goals.
I'm here if you have any questions or would like to discuss your personal situation.