February 2021 - Week 1 Edition
Silver shot up $5 in the last three days of January, first rising from $25 to $27 on Friday, then leaping to $30 Sunday night for a January gain of over 13%. This “silver surge” started with ETF demand and then moved into physical silver. As always, when a huge increase in demand meets a lower supply, the price shoots higher. This could be the beginning of another drive toward $50 an ounce, which happened in January 1980 and again in April 2011.
What’s Behind the Sudden Silver Surge?
Last week revealed a dramatic split in Wall Street vs. Main Street when major hedge funds “shorted” some popular youth-oriented businesses like GameStop and AMC Entertainment. In response, millions of small investors bought a few shares of those stocks, pushing their price up and putting such pressure on the hedge funds that some had to be bailed out by bigger funds. The David’s were “stoning” the Goliaths.
Then, on Thursday night, the drama turned to the narrowly traded silver market. Since silver is a far narrower market than gold and most major stocks, a user in Reddit’s popular “WallStreetBets” forum posted a strategy about executing a “short squeeze” in the volatile silver market, using silver ETFs, like iShares Silver Trust. The Reddit post was quickly removed and downplayed by WallStreetBets but not before it was picked up by Twitter users and #SilverSqueeze began trending. By late Thursday, silver surged as much as 6.7%, but some silver mining stocks gained over 20%. Some dealers had to stop ads promoting silver at lower prices. Storefronts had 20 people lined up at the door to buy silver. The U.S. Mint also reduced its American Silver Eagle allocation to dealers further squeezing physical supply.
Spot silver markets and silver securities were closed for trading over the weekend, but spot silver markets open at 5:00 pm Eastern time on Sundays (Monday morning in Asia), and silver jumped up $2 an ounce at 5:00 Sunday, reaching an 8-year high of $30.35 per ounce at one point. Silver prices are likely to come back to Earth once the Reddit-inspired traders back off, but that will not ease the silver shortage from the U.S. Mint or the strong fundamentals of greater industrial demand (for solar panels) and renewed investor demand.
This kind of short squeeze happened once before, big time, in 1979-80, when the Hunt brothers cornered the silver market, driving the price to $50 in January 1980, but then the commodity regulators changed the trading rules, forcing the price of silver down to $11 by late March. Still, the drive to $50 silver and $850 gold caused a wave of new buyers in numismatic coins in the early 1980s. This could be starting again. Call your account representative today!
U.S. Mint Gold Sales Soared nearly 250% in January - and Silver Soared in the Final Week
Bullion coin sales at the U.S. Mint soared in January 2021 over the same month in 2020. Gold coin sales more than tripled, while Silver American Eagle sales were up 24% and would have been up more if the Mint could have met soaring demand levels in the final week of the month. Here are the Mint sales totals:
For the month of January, Silver outperformed gold, crude oil and the stock market by a long shot:
Going into the final week of January, silver was below zero for the month, but it soared the last four days.
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