Silver price soars to 8-yr high; retail traders work on short squeeze
(Kitco News) - Silver futures prices are trading strongly higher and hit an eight-year high of $30.35 in early U.S. trading Monday. Retail traders, emboldened by social media chatrooms, are working on a short squeeze in the market, meaning trying to force traders short the silver market to capitulate. Gold is following silver higher and is also seeing a bit of safe-haven demand amid a recently wobbly U.S. stock market. April gold futures were last up $17.30 at $1,867.40 and March Comex silver was last up $2.896 at $29.81 an ounce.
The feature in the marketplace to start the trading week and the month of February is that silver prices popped to an eight-year high above $30 an ounce today as retail traders are looking for a “short squeeze” in the market. Social media lit up during the weekend, especially on Reddit, as the growing retail band of traders looked to slay another market--this time silver--that they claim is dominated and manipulated by the “big boys” on Wall Street. This follows the GameStop saga that played out last week, whereby the smaller retail traders put the squeeze on big hedge funds that had shorted the troubled business. The silver is a much bigger beast to take on than is a smaller individual stock. Still, the “Redditors” have put a scare into many on Wall Street, especially the big hedge funds that like to short stocks they feel will be in some trouble either at present or in the future. While the gains in silver are certainly strong, they are not the epic moonshot price advances that some social media sites were predicting during the weekend. However, the trading week is still young and much can still happen. Importantly, the gold and silver markets had a bit of a tailwind behind them before the Redditor trade kicked in. Many veteran market watchers were already reckoning the “inflation trade” would boost raw commodity markets, including the metals, what with major central banks and governments pumping so much liquidity into financial systems in order to jumpstart major world economies that have been crippled by the Covid-19 pandemic.
Global stock markets were mostly firmer overnight. U.S. stock indexes are pointed toward higher openings when the New York day session begins, after opening lower in Sunday evening trading. Declines in the rate of Covid-19 infections and deaths in the U.S. are positive elements for trader and investor sentiment.
In other overnight news, the Euro zone January manufacturing purchasing managers index (PMI) came in at 54.8 versus 55.2 in December. A reading above 50.0 suggests growth in the sector.
The key “outside markets” today see the U.S. dollar index higher. Meantime, Nymex crude oil futures prices are higher and trading around $52.65 a barrel. The yield on the benchmark 10-year U.S. Treasury note stands at 1.076%.
U.S. economic data due for release Monday includes the U.S. manufacturing PMI, the ISM report on business manufacturing, the global manufacturing PMI and construction spending.
Technically, the February gold futures bulls have the slight overall near-term technical advantage amid the recent choppy trading. Bulls’ next upside price objective is to produce a close in February futures above solid resistance at $1,900.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the January low of $1,804.70. First resistance is seen at last week’s high of $1,878.90 and then at $1,900.00. First support is seen at the overnight low of $1,851.70 and then at last week’s low of $1,832.40. Wyckoff's Market Rating: 5.5
March silver futures bulls have the strong overall near-term technical advantage with the big gains of the past three days. Silver bulls' next upside price objective is closing prices above solid technical resistance at $35.00 an ounce. The next downside price objective for the bears is closing prices below solid support at $27.77. First resistance is seen at $30.00 and then at the overnight high of $30.35. Next support is seen at $29.00 and then at the overnight low of $28.155. Wyckoff's Market Rating: 9.5.