Silver plunges after hitting near 8-year peak driven by retail buying blitz

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By David Brough

Silver prices sank on Feb. 2 after hitting a near 8-year high the previous session driven by a frenzy of buying by retail investors after calls to buy the metal on social media.

Silver jumped to $30.03 per ounce, its highest since February 2013, on Feb. 1. In late trade on Feb. 2, silver was down 7 percent to $26.57 per ounce.

Small-scale traders, swapping tips in social media chatrooms, piled into silver mining stocks and exchange-traded funds (ETF) backed by physical silver bars late last week and on Feb. 1, switching their attention away from GameStop and other stocks.

This follows frenzied activity in GameStop, when the smaller retail traders put the squeeze on big hedge funds that had shorted the troubled business.

“There is a strong chance the next phase of the bull market is already under way, having been triggered by what appears to be new interest in silver investment, stimulated like GameStop in the equities markets by social media getting behind it,” wrote Lawrie Williams, precious metals commentator with bullion dealer Sharps Pixley.

The rally in silver prices since last year has complicated sourcing decisions by jewellers, increasing the need to hedge their positions and has impacted on the relationship between gold and silver prices.

The gold:silver price ratio fell below 70 for the first time in three years, as gold failed to keep pace with silver.

Silver prices jumped almost 50 percent in 2020, while gold rose by a quarter.

The disconnection between gold and silver suggests that the silver rally could be short-lived, some analysts said.

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However, Jeff Christian of New York-based consultancy CPM Group, said the market fundamentals of silver were bullish due to tight supplies and growing industrial demand.

Silver Jewellery