Sponsored Content - Here’s the headline from the Los Angeles Times back on August 21, 1988, recalls Rich Checkan of Asset Strategies International.
Hunts Guilty of Scheme to Corner Silver: Texans Ordered to Pay $130 Million to Firm in Fraud Convictions
Fast forward a little over three decades, and we see this headline from The Wall Street Journal…
Silver Prices Jump in GameStop-Like Frenzy
Biggest one-day gain in more than a decade is latest sign of speculative trading that is jolting financial markets.
Back in the 1970’s, Nelson Bunker Hunt, William Herbert Hunt, and Lamar Hunt, along with the help of some Arab sheiks and a Lebanese businessman, got a heck of a lot closer to cornering the silver market than r/WallStreetBets did at the end of January.
But, the subreddit did get everybody’s attention, and they did have some impact.
Let’s take a look at what prompted the headline, then, we’ll consider what this means for silver going forward.
Over the past few weeks, the subreddit, r/WallStreetBets, has been garnering quite a bit of attention. In an effort to save some of their dearly beloved brands as they stick it to the hedge funds, r/WallStreetBets activists had a serious impact on the price of GameStop (GME), AMC Entertainment Holdings Inc. (AMC), and other stocks.
They also put the fear of God in a few hedge fund managers and the market in general.
This classic David and Goliath story resulted in GME’s market cap rising from under $3 billion to around $22.67 billion. And, it is estimated, assorted hedge fund losses were somewhere around $19 billion.
Don’t Bite Off More Than You Can Chew
On Saturday, January 27, rumors started to circulate. The word was the r/WallStreetBets folks were switching their target. Silver was now the focus of their efforts.
Despite a number of denials from r/WallStreetBets, the rumor mill was in full gear. Other investors started jumping into the pool as well. After all, they all saw what was possible with GME, so they wanted a front-row seat for the move on silver.
I’m certain most thought it worthwhile to see where they could take the silver price before all was said and done.
In the frenzy of the next couple days, investors scrambled to load up on silver. This spike in demand caused a number of major on-line precious metals retailers to halt the sale of silver altogether until the situation was clearer…and supplies were once again available.
In the end, there was an impact. I’m not sure how much was a result of r/WallStreetBets investors versus various other market participants along for the ride. The ride was as thrilling as it was short-lived.
Silver closed on Friday, January 26, slightly above $25 per ounce. It reached a peak on Monday, February 1, just under $30 per ounce, an eight-year high. By Thursday, February 4, silver closed at $26.60 per ounce.
Much ado about nothing.
The Impact on Silver
After a week with a flurry of activity, nothing much changed. If silver was in fact the target of the r/WallStreetBets folks, it was a bad choice. Silver’s market capitalization is many orders larger than that of GameStop. The silver market is about $1.46 trillion.
For those who jumped in to see where the price could go, they’ll be fine in the long term, but they are surely disappointed with their little experiment. Short-term noise can always have an impact on a market, but the trend is so much more important.
In silver’s case, we are in the early stages of a bull market expected by many to last another five-seven years. The current price is not quite 100% higher than the lows of $13.83 back in December of 2015. And, that was after silver surged 48% in 2020…the best-performing asset aside from Bitcoin’s speculative craze. It even beat out the high-flying Nasdaq last year!
That 100% appreciation from the lows in 2015 is just one-tenth of where most people believe silver will be at the end of this bull market, because it is one-tenth of the 1,000% appreciation we saw in silver from 2001 to 2011…silver’s last bull market.
So, despite the price action over the end of January, this bull market is alive and well…and worth participating in.
Silver Supply Was Squeezed
The most obvious impact of this financial market theater was the effect it had on premiums for fabricated coins and bars, and the spike in delivery times for when purchased.
Demand for silver and gold coins and bars had already spiked in late December and early January. Both government and private mints were struggling to meet that demand.
In addition, the recent surges in Covid-19 cases were having an impact on supplies. The mints started to revert to shift work, reduced manning, and increased social distancing. The result was diminished output…precisely as demand was surging.
Add to that scenario the silver buying frenzy, and it is no surprise we saw an immediate increase in premiums and extended projected delivery times.
It was not uncommon to see wholesale premiums jump up 75% or more.
It was also not uncommon to see delivery times for orders go from two-three weeks to “completely unknown.”
And, those changes in terms had very little impact in discouraging would-be buyers.
There is a Silver Lining
Through it all—and in every other supply squeeze I have experienced over the past 25 years—there was one way to buy silver for immediate delivery with no change in premium whatsoever…not a single cent.
Call us. Let us know you heard about us from The MoneyShow, and we’ll tell you how. It’s the best way we know to help you keep what’s yours…even in the midst of a short squeeze.
Learn more about Rich Checkan at AssetStrategies.com.