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Silver surges as Reddit army turns to commodities Silver surges as speculators focus on commodities
(32 minutes later)
Silver prices leapt to a eight-year high on Monday, amid social media calls to buy the metal and emulate the frenzy that drove up shares in US video games retailer GameStop. The price of silver hit an a eight-year high on Monday, amid social media calls to buy the metal and emulate the trading frenzy that surrounded US games retailer GameStop last week.
Shares in a handful of smaller Australian mining firms surged as small-time traders bought en masse. Shares in a handful of smaller Australian silver miners surged as small-time traders bought en masse.
Argent Minerals jumped 60% while Investigator Resources was up 47%.Argent Minerals jumped 60% while Investigator Resources was up 47%.
Coin-selling websites also reported unprecedented demand and flagged delays in delivering silver.Coin-selling websites also reported unprecedented demand and flagged delays in delivering silver.
Silver rose by as much as 11% to $30 an ounce, its highest value since 2013.Silver rose by as much as 11% to $30 an ounce, its highest value since 2013.
What is going on?
It is the latest example of apparently small-time traders taking on big Wall Street hedge funds that hope to profit when the price of an asset or stock falls, but could lose heavily if it rises.
Tips posted on social media sites like Reddit - say these so called "short sellers" are manipulating the markets.
And so they buy up the stocks or assets, with the spike in demand driving up the price and inflicting losses on the big players.
UK trading platform IG stops new GameStop tradesUK trading platform IG stops new GameStop trades
GameStop: Who is winning the market battle?GameStop: Who is winning the market battle?
Global watchdogs on alert as GameStop frenzy growsGlobal watchdogs on alert as GameStop frenzy grows
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. It began in January when amateurs piled into loss making retailer GameStop, causing its stock to spike more than 700% in a week.
Some users in the Reddit forums WallStreetBets and WallStreetSilver argued that silver is a heavily manipulated market, and a surge in the silver price could hurt large financial services companies. But now the traders have turned their attention to silver - a far bigger market that they also argue is being manipulated.
"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. What's being said to stoke the speculation?
However, reflecting the febrile atmosphere, some on Reddit alleged that "the Silver Squeeze" was secretly being coordinated by big Wall Street firms. The amateurs have clearly been successful so far, with silver prices up 20% since Wednesday, when messages began circulating on Reddit forums such as Wall Street Silver, encouraging users to buy the metal.
The recent GameStop surge, which was fuelled by amateur investors, was also seen as a revolt against large institutional investors. Reflecting the attitude of many of those swapping tips on the site, one user called RocketBoomGo urged others to "think about the Gainz" in a widely circulated post.
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. "If you don't care about the gains, think about the banks like JP Morgan you'd be destroying along the way," they added.
WATCH: What's been going on at GameStop? Amateur investors caused shares in GameStop to surge more than 700% last week
"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 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 into the miners.""There's a lot of commentary on these platforms to pile into the miners."
Silver prices are up 20% since Wednesday, around the time when messages began circulating on forums such as Reddit encouraging users to buy the metal and drive up prices. WATCH: What's been going on at GameStop?
But Hussein Sayed, chief market strategist at FXTM, said influencing the price would not be as simple as it was with GameStop. However, reflecting the febrile atmosphere, some have alleged that the so called "Silver Squeeze" as it is being dubbed is secretly being coordinated by big Wall Street firms.
"Silver's market cap is in the range of $1.4 trillion to $1.6 trillion as opposed to GameStop's $1.5 billion before becoming the target of retail investors and a large proportion of the market is off-exchange." Hussein Sayed, chief market strategist at FXTM, added that amateur investors would anyway find harder to influence the price of silver than they did with GameStop.
He added: "Retail traders who are just following the herd and join the party late may accumulate huge losses and need to be more rational in their decisions." For one thing, the total value of silver being traded is around $1.4-$1.6 trillion, he said, which is 1,000 times the total value of GameStop's share capital, which was $1.5bn before it became the target of speculation.
Massive losses for Melvin A large proportion of the silver market also exists "off-exchange", meaning it can't be bought and sold as easily online.
The latest surge comes as the damage to one Wall Street firm becomes clearer. "Retail traders who are just following the herd and join the party late may accumulate huge losses and need to be more rational in their decisions," Mr Sayed added.
Hedge fund Melvin Capital lost 53% of its value towards the end of January, according to media reports. Are the Wall Street giants on the ropes?
The firm received commitments for fresh cash from investors at the end of the month, leaving it with $8bn (£5.8bn) in assets, but that was still down from $12.5bn at the beginning of 2021, according to Reuters. Despite what some retail traders had hoped, some of the biggest profiteers from last week's market action were said to be Wall Street giants such as asset manager BlackRock and the private equity firm Silver Lake.
The firm had bet that GameStop's stock, which traded at less than $5 five months ago, would fall further. However, other big investors have been hammered by the trading frenzy.
But retail investors, comparing notes on social media platform Reddit, bought the stock and sent it higher to close at $325 on Friday. Hedge fund Melvin Capital - which bet heavily that shares in Gamestop would fall - lost 53% of its value towards the end of January, according to media reports.
Are you an amateur investor who has bought silver in the last few days? Get in touch and let us know what motivated you. Email haveyoursay@bbc.co.uk. The firm has since received commitments for fresh cash from investors, leaving it with around $8bn (£5.8bn) in assets, but that is still down from $12.5bn at the beginning of 2021, according to Reuters.
Please include a contact number if you are willing to speak to a BBC journalist. You can also get in touch in the following ways: The firm had bet that GameStop's stock, which traded at less than $5 five months ago, would fall further, which would have allowed it to pocket a gain through what is known as "short selling".
WhatsApp: +44 7756 165803 But retail investors bought the stock and sent it higher to close at $325 on Friday.
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