02 February 2021

Silver Notches Near 8-Year High Amid Retail Mania

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News shaping
the markets today

     

What’s happening: Silver recorded sharp gains on Monday, reaching a near eight-year high, as social media turned focus away from GameStop.

What happened: Shares of GameStop and AMC Entertainment spiked last week, driven by retail traders supporting stocks shorted by institutional investors after a Reddit chat.

With the shares of these companies retreating, a social media driven buying spree started for silver on Monday.

Why it matters: GameStop’s stock recorded gains of around 400% last week, despite there being no major announcement from the company to drive the shares higher. The stock settled sharply lower on Monday as retail traders turned their attention to metals.

The sudden support for silver came after a post on Reddit’s r/WallStreetBets forum urged traders to buy the precious metal, targeting the short position of big banks.

“The Silver squeeze will bring down the biggest banks in the world. That's why Robinhood barred trading of $SLV the day after they took a billion dollars in loans from JPM and Goldman Sachs,” the post said.

Silver was among the best performing assets in 2020, recording around 50% gains. The iShares Silver Trust, the world’s biggest silver-backed exchange traded fund, reported inflows of around $1 billion on Friday, according to BlackRock. The 37.05 million rise in the number of shares of the fund was the sharpest single day increase since the ETF began trading in April 2006.

Some analysts attributed the rise in silver prices to reports of a scarcity of silver bars. Demand for physical silver is up almost twofold since Thursday.

Silver prices settled higher at $29.42 an ounce on Monday, after surging to an eight-year peak of just above $30 per ounce earlier in the session. The white metal had gained around 6% last week. Gold prices too closed higher, at $1,863.90 an ounce.

What to watch: Markets will focus on volatility in silver prices, amid speculations of a GameStop-like spike. Investors will also keep an eye on the US House of Representatives Financial Services Committee’s meeting around the latest market events, scheduled for February 18.

Some profit-taking in silver can be expected today. The white metal traded more than 3% lower during the Asian session.

The Markets Today

     

European stocks will be in focus today ahead of GDP data from the region.

Context: European markets started the new trading week on a strong note following frenzied sessions last week.

Details: Global markets seemed to brush off concerns over heightened speculative trading in the US, which drove shares prices of GameStop and AMC Entertainment sharply higher last week.

Investors in European stocks closely monitored recent developments related to a slow rollout of covid-19 vaccines due to a range of problems, including AstraZeneca’s production issues.

Meanwhile, the Eurozone’s unemployment rate came in steady at 8.3% for December, with 13.671 million people unemployed across the bloc, versus 13.616 million in November. Investor sentiment was hit by a decline in Eurozone’s manufacturing PMI to 54.8 in January, from 55.2 in December. Germany’s manufacturing index also slipped to 57.1 in January, from 58.3 in the previous month.

The pan-European Stoxx 600 surged by 1.24% to close at 400.77 on Monday, with most sectors recoding gains. Tech shares led the rally, adding more than 2% in the session. Germany’s DAX 30 index and the French 40 added 1.41% and 1.16%, respectively.

British manufacturing activity rose at its slowest pace in three months, following renewed covid-19 restrictions. The final IHS Markit/CIPS manufacturing PMI fell to 54.1 in January, from 57.5 in December. Despite this, London’s FTSE 100 rose 0.92% to settle at 6,466.42 on Monday.

What to watch: Markets await GDP data from the Eurozone. The Eurozone economy is expected to contract by 5.4% year-over-year in the fourth quarter, following a 4.3% decline in the third quarter.

Rising covid-19 cases remain a major concern for investors, with total infections surpassing 103.3 million globally.

Other Markets: US trading indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.76%, 1.61% and 2.5%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

UK’s Nationwide house price index, France’s consumer prices, Spain’s unemployment rate, Italy's gross domestic product, Brazil’s industrial production, India’s balance of trade, Mexico’s manufacturing PMI, Russia's gross domestic product as well as the US Redbook index, ISM New York current business conditions index and IBD/TIPP economic optimism index.

 

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