Goldman Sachs sees silver price rising to $33 an ounce, Reddit squeeze was doomed to fail
(Kitco News) - Volatility continues to dominate the silver prices as the market continues to deal with the fallout of a fizzled short squeeze after a mob of retail investors jumped into the precious metal.
Silver prices are seeing a small bounce Wednesday after the market’s significant drop Tuesday. The market is still significantly down from Monday’s nearly eight-year highs. March silver futures last traded at $27.10 an ounce, up 2.64% on the day.
Looking through the recent volatile price action, Goldman Sachs analysts, in a research report published Tuesday, reiterated their bullish forecast for silver.
The bank sees prices rising as high as $33 an ounce as U.S. President Joe Biden moves forward with a plan to increase alternative renewable energy production.
While many retail investors -- organized through social media and a Reddit post from Wall Street Bets -- were hoping to create a short squeeze in silver, similar to what they accomplished in stocks like Gamestop, Blackberry and AMC, Goldman Sachs said the plan was doomed to failure.
"While some shorts are speculative and require covering before expiry, most are driven by industrial producers hedging their forward earnings," the analysts said in their note. "When commodity short positions are broadly backed by real physical stock, there will be no subsequent buying and no short squeeze."
In an interview with Bloomberg News, Jeffrey Currie, global head of Commodities at the investment bank, said that the silver market is worth about 200 billion dollars annually; it is just too big for retail investors to manipulate.
"To corner the market and create a short squeeze, we estimate would require each one of the Wall Street Bet individuals to accumulate positions of around 4,200 ounces," he said. "That is a lot of silver, and where are you going to put it.
The bank also noted that after the Hunt brothers infamously tried to control the entire silver market in the 1980s, regulations came that now make it nearly impossible to corner the market.