GameStop virus mutates as investors eye silver surge

Photo: AP

Social media related stock trading may be gaining pace after GameStop shares slumped by 28% in the beginning of the way after a nearly 300% rally since the start of 2021, Reuters reported. In the GameStop affair amateur investors clashed with mutual funds over the stocks of troubled retail firms. However the social media driven demand prevailed and prices surged. Similar demand has been seen in regards of silver, AP reported.

Silver prices have edged to an eight-year high at $29.42 per ounce. That exuberance spread to companies that mine precious metals, especially silver. Shares of Pan American Silver surged about 12%, First Majestic Silver rose 22% and Hecla Mining spiked 28%. Last week, there were messages on the Reddit forum, WallStreet Bets and other places on social media encouraging small investors to buy silver. The metal shot up Monday, but many of the online investors said it wasn’t them bidding up the price.

An online army of Reddit traders banded together for the past week to snap up thousands of shares of GameStop, AMC and other struggling chains, stocks that have been heavily shorted (bets that the stock will fall) by a number of hedge funds. In the process, they’ve done heavy damage to those hedge funds in a stunning reversal of financial power on Wall Street. Some of these smaller traders believe the hedge funds that were pillaged last week are behind the surge in silver. Communications on messaging boards claim hedge funds have now become active on Reddit, attempting to drive them out of GameStop bets and into silver, but only after hedge funds had taken huge positions.

Meanwhile, GameStop shares dropped to $233 but the stock price has been tremendously volatile. Last week’s turmoil caused hedge funds to pull back on their investments by the sharpest degree since February 2009, during the market collapse caused by the financial crisis, according to Goldman Sachs, which provides services such as clearing and consulting to hedge funds. The US House of Representatives Financial Services Committee said it would hold a hearing on recent market volatility on 18 February.

Traders were growing concerned that the Reddit effect could extend to less liquid commodities markets. However, traders said exchange-traded funds that focus on commodities were more likely to be targets.

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