Shares in silver mining stocks soared after the price of the precious metal jumped 10% to $29.49 an ounce as retail investors piled. Silver has become the latest asset to be targeted by retail investors associated with the Wallstreetbets group on community platform Reddit.

The spot price of silver is at a six-month high while silver future contracts gained as much as 13% to $30.35 an ounce. At one point the spot silver price touched over $30 an ounce, an eight-year high.

Silver miners jumped on the news, with FTSE 100 constituents Fresnillo (FRES) up 17.2% to £11.57 and Polymetal International (POLY) gaining 8.1% to £17.09.

In the FTSE 250, Hochschild Mining (HOC) jumped 11.6% to 256.6p, while precious metal investor Wheaton Precious Metals (WPM) rose 9.4% to £34.02.

REVENGE OF THE LITTLE GUY

First it was GameStop, now silver has caught the attention of the Reddit community.

Users in the Reddit forum Wallstreetbets have called for a short squeeze on the commodity arguing that silver is a manipulated market. The call to action is also being pitched as a way for ordinary investors to deal a blow to big Wall Street institutions and hedge funds.

‘If you don't care about the gains, think about the banks like JP Morgan you’d be destroying along the way,’ said Reddit user RocketBoomGo in a widely circulated post.

However, it has been questioned whether there is the same scope for a short squeeze in the way there was for GameStop and other stocks. GameStop was valued at $1.5 billion before the Reddit-fuelled buying frenzy, but silver sitting in vaults in London alone is  worth an estimated $48 billion.

While unlike GameStop, money managers have had a net-long position on silver since mid-2019 according to Bloomberg.

‘UNDERSTANDABLE’ SILVER ATTRACTING REDDIT ATTENTION

AJ Bell investment director Russ Mould said it was ‘understandable’ silver is attracting attention from social media traders with allegations around, and fines for, investment banks rigging precious metal markets having abounded for some time.

He said, ‘More fundamentally, money supply is surging, markets more generally are watching carefully for any signs of inflation and precious metals are traditionally seen as a potential hedge here.

‘In addition, gold currently trades at 70 times the silver price, against the long-run average of 58 times, so on paper silver is the cheaper of the precious metals. This will be an interesting test of the conspiracy theories that precious metals prices have been kept artificially low.’

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Issue Date: 01 Feb 2021