Silver, GameStop Sink as investor frenzy shows signs of cooling



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The investor frenzy that fueled wild gains across everything from GameStop Corp. to money, shows signs of fatigue.

The metal fell more than 5% on Comex on Tuesday, rising from an eight-year high after margin requirements increased and analysts warned of continuing the rally. GameStop, whose Reddit-inspired push sparked a wave of buying in other heavily shorted stocks, fell 16% on Monday after hours for trading in the US, extending a 31% drop during the session regular.

Other high ruffles including AMC Entertainment Holdings Inc. and Koss Corp. also fell at the end of New York. Some of the biggest winners from last week in Asia, including China Literature Ltd., fell behind the benchmarks on Tuesday.

No one knows if this marks an inflection point for the manic gains that have spilled from asset to asset over the past few weeks. But the pullback gives credit to market watchers who said it was only a matter of time before the rallies started to fade.

Silver’s retracement “was not surprising, as any longer-term price hikes due to collaboration and social media-driven conspiracy theories were always going to be unsustainable,” said Gavin Wendt, senior resource analyst at MineLife Pty. difference, however, between trying to manipulate trading in a stock versus a major commodity traded on the exchange.

Money soared 13% on Monday after becoming one of the last – and biggest – investments to catch Reddit’s attention WallStreetBets Forum.

It is still unclear who the author of the messages that sparked the huge momentum was, or who exactly was behind the negotiation. The Reddit posters themselves now appear to be in conflict over trade, and market watchers have warned that finding a commodity would be a more difficult proposition than squeezing individual stocks.

Silver futures sink after hitting their highest level since 2013

The hatched speculative activity online has captivated global markets after triggering huge swings in stocks such as GameStop, although fears that the frenzy could derail the equity bull market have started to recede. US regulators have said they are closely monitoring developments.

Most active silver futures fell 5.5% to $ 27.81 an ounce on Comex after CME Group said margins would drop from $ 14,000 to $ 16,500 per contract from February 2. The decision was based on “the normal review of market volatility to ensure adequate collateral coverage, ”he said.

“Basically I don’t think there are any significant short positions in the silver market because the outlook for silver is strong this year after a strong performance in 2020,” said Wendt.

As the frenzy grew, BlackRock Inc.’s iShares Silver Trust recorded an unprecedented net amount of $ 944 million Friday, followed by another $ 551 million on Monday after a since-deleted post was posted to the WallStreetBets forum that encouraged traders to get into the exchange-traded product. That move now appears to be running out of steam, with some on Reddit urging fellow investors to pull out of the money.

“We suspect that prices will remain volatile,” said James Steel, chief precious metals analyst at HSBC Securities (USA) Inc., in a note ahead of the announcement of the margin increase. “Beyond this week, and possibly sooner, we believe new market entrants might tire and start liquidating cash holdings, with a commensurate price impact. Attention, buyer! “

– With the help of Jake Lloyd-Smith, Ranjeetha Pakiam and Sunil Jagtiani

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