Neil Hume and Henry Sanderson
Shares in silver miners and exchange-traded funds backed by the precious metal tore higher on Thursday as the Reddit army of day traders turned their attention to producers of the volatile precious metal.
Fresnillo, the Mexico-focused miner hammered the day before after a disappointing trading update, amassed a whopping 10 percent to secure the top spot in the FTSE 100 performance chart.
Meanwhile, shares in Hochschild Mining, which has operations in Peru and Argentina, rose 7 percent to become the largest riser in the FTSE 250 index. Canada-based First Majestic Silver, which operates in Mexico, rose 29 percent on the New York Stock Exchange.
The price hike was not limited to miners. Shares in the world’s largest silver-backed ETF, the iShares Silver Trust, were up 6 percent after a user on Reddit’s WallStreetBets forum urged people to buy stocks and call options.
U / TheHappyHawaiian user said that buying shares in the ETF would force “physical delivery of silver” into its vaults, creating a “short squeeze” in the market. That made the silver price rise. That would pose problems for traders who were short silver in the futures markets, they said.
“The people who are naked short silver through the futures markets are some big banks and it would be incredible to make them pay dearly for their over-leveraged naked shorts,” said the user.
Still, Ross Norman, a veteran precious metals trader, said that the big banks used futures contracts to hedge their physical holdings of silver so they weren’t “naked shorts.”
“There is a misnomer here that banks are constantly short positions, but from a price point of view they are neutral, they have a long and a short that cancel each other out,” he said. “It’s a silly message, it’s financial anarchy, someone is going to get hurt.”
The iShares Silver Trust is backed by physical holdings of silver with a current holdings of 17,787.58 ounces, according to its website.
Silver prices rose 5 percent to $ 27 an ounce on Thursday.