Silver Futures Gap Higher on Squeeze Play; Reddit Traders also Eyeing Silver Mining Stocks

Nearby silver futures gapped higher on Sunday night in the pre-market trading session as the Reddit-fueled boom in highly shorted stocks appears to be spilling over into the precious metals market.

March silver futures gapped to $28.425 on the opening, surging to an intraday high of $29.25 before reaching its high and dropping back below the opening. The price action indicates that investors could be in for a wild ride on Monday when the regular session opens at 13:00 GMT.

The early price action left a gap between Friday’s high at $27.70 and Monday’s pre-market low at $28.155. Speculative buyers will try to maintain the market’s early strength, while sellers will try to fill the gap formed on both the daily and weekly charts.

The market’s 8% jump shortly after the futures market opening, marks the biggest move in the futures since at least 2013.

Silver and Silver-Related Equities Getting Squeezed

Today’s sharp move in silver builds off gains for silver and silver-related equities late last week. Silver mining stocks Coeur Mining and Pan American Silver rose 16.9% and 14.7%, respectively, on Thursday and Friday. The iShares Silver Trust (SLV) jumped 6.7% during those two sessions.

CNBC is reporting that the spike in demand for silver appears to be related to retail traders in the Reddit forum WallStreetBets, which has helped drive trading activity in heavily shorted stocks like GameStop and AMC Entertainment in recent weeks.

The forum had multiple active threads dedicated to silver on Sunday night. The phrase “#silversqueeze” was also trending on Twitter.

Last week’s dramatic spikes in GameStop and other heavily shorted stocks were due in part to a short squeeze, which is a phenomenon where investors who have bet against a stock are forced to buy shares to cover their positions as the issue moves higher.

Silver Short-Squeeze May Benefit Bitcoin

The rally in silver is being touted by investors who are bullish on Cryptocurrencies like Bitcoin, which see the new digital assets in part as replacements for traditional metals.

Cameron Winklevoss, co-founder of cryptocurrency firm Gemini, said on Twitter that, “The ramifications of a #silversqueeze cannot be underestimated. It it’s exposed that there are more paper claims on silver than actual silver, not only would payoff be enormous, but gold would be next. #Bitcoin fixes this.”