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  • A shift in the recent retail investing frenzy has driven the price of silver to its highest point since 2013, though it’s not certain who’s driving the buying
  • Silver futures surged to an eight-year high of US$30 (around A$39) an ounce overnight before pulling back to just under US$29 (around A$37.90) an ounce
  • While many media outlets are attributing this rise to the same army of retail investors who drove GameStop’s (GME) NYSE-listing to record highs, the social media platforms driving the investments deny their involvement
  • A Reddit thread on r/WallStreetBets, the forum that started it all, claims the hedge funds on the other side of the GameStop short squeeze have long positions on silver
  • This was seemingly confirmed when it was revealed hedge fund Citadel is a major shareholder of SLV, the biggest silver exchange-traded fund in the world
  • Whether the silver surge is being driven by retail investors or Wall Street funds is unclear, but the truth is probably somewhere in between
  • Today, silver futures are down just over a per cent at US$28.34 (around A$36) an ounce

A shift in the recent retail investing frenzy has driven the price of silver to its highest point since 2013, though it’s not certain who’s driving the buying.

Silver futures surged to over US$30 (around A$39) an ounce overnight before pulling back to just under US$29 (around A$(37.90) an ounce.

The silver surge comes after retail investors from Reddit forum r/WallStreetBets flocked to gaming store GameStop (GME) earlier this month to force billion-dollar hedge funds to cover weighty short positions they’d taken on the stock.

AMC Entertainment (AMC), Nokia (NOK), and Blackberry (BB) are some of the other stocks being eyed out by the army of online mum and dad investors.

The majority of the trading was done through online broker platforms like Robinhood, which has since raised over US$3 billion (around A$4 billion) to keep up with trading demand.

GameStop shares, which were trading around US$18 (around A$23.50) per share at the beginning of the year, skyrocketed to an intraday-high of well over US$400 (around A$520) per share last week.

While GameStop has since given back some ground, last closing at US$225 (around A$294) per share, the social media craze caused a massive shift in the balance of power between the retail investor and the professional investor.

Everyday investors have realised the power that comes in numbers — so long as they can be unified through online forums or social media feeds.

Hedge funds have realised this, too, and now each group is scrambling to work out how to come out on top of the fight between Wall Street and retail investors.

It seems this scuffle is what’s driving the price of silver, though no one seems to really know which side of the battle wants the price to rise.

A target or a distraction?

The silver surge has been attributed to a GameStop-style squeeze, though social media traders behind the massive market swings claim no involvement in the silver buy-up.

While it’s true that there were some posts urging others to buy silver on r/WallStreetBets, the online forum that started it all, these were far and few between the hype around the likes of GME and AMC.

Now, despite some media outlets attributing the rise in silver to these online forums, those involved in the retail trading mania are claiming it’s actually the hedge funds driving people to invest in the precious metal.

A Reddit thread titled “The Silver Squeeze is a hedge-fund coordinated attack so they can keep fighting the $GME fight” garnered over 72,000 “upvotes” and 4400 comments.

This thread accused major hedge funds on the other side of the GME fight of posing as retail investors and trying to convince people to buy silver.

There are two reasons for this, according to the thread: firstly, this will distract from the GME squeeze and draw money away from the current stocks being targeted by retail investors, and, secondly, these hedge funds have long positions on silver instead of short positions — meaning they are betting on the price of silver increasing instead of decreasing.

“By buying silver/going long on silver, you would be directly putting money into the pockets of the EXACT HEDGE FUNDS ON THE OTHER SIDE OF $GME,” the thread said.

This idea was seemingly confirmed when it was revealed that Citadel — a major hedge fund and one of the biggest losers of the GameStop squeeze so far — is a major shareholder of SLV, the world’s biggest silver exchange-traded fund.

Citadel held around 6 million shares in SLV at the end of September, though it’s uncertain if the company’s position has changed since then. If this position is unchanged, Citadel would be a major beneficiary of the surging silver price.

Of course, this is not enough evidence to suggest that Citadel and other funds have banded together like the mum and dad investors on social platforms to profit from the rise of silver.

But the truth, as is often the case, is likely in between the two stories: retail investors caught up in the hysteria of the past month have likely jumped on the silver bandwagon without much due diligence. And, given what it has to gain, Citadel is likely encouraging this investing.

What this means for the price of silver in the coming days and weeks is uncertain. Today, silver futures are down just over a per cent at US$28.34 (around A$36) an ounce.

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