This week we explore a revolutionary development in the financial world: one of the most influential names in central banking revealed the purchase of shares in a Bitcoin ETF, signaling a big shift in the acceptance of digital assets by traditional financial powers.
Additionally, the meme stock craze appears to be back. Earlier this week, shares of GameStop (GME) and AMC Entertainment (AMC) surged again, echoing the frenzy of 2021.
We also look back at the “Silver Squeeze” from the same period, where Reddit traders targeted the silver market, with the aim of exposing alleged manipulation by large financial institutions. We discuss why silver might be ripe for a short squeeze…
But first an update on precious metals:
Silver climbs above $28.50/oz
Silver continues its fantastic year, up about 20% year to date. The rise is driven by increased industrial demand, concerns about inflation and renewed interest from investors looking for safe-haven assets.
Gold hits three-week high
Gold prices hit their highest level in three weeks on Wednesday, lifted by a weaker dollar and lower yields. The U.S. consumer price index rose less than expected in April, increasing the likelihood of an interest rate cut from the Federal Reserve.
Silver demand for photovoltaics increased by 64% year-on-year
In 2023, industrial demand for silver increased by 11%, reaching a new record, as reported by the World Silver Survey 2024. Use of silver for photovoltaic applications in solar technology, up 64% compared to the previous year, was the origin of this increase in demand.
Global platinum market faces increased deficit in 2024
Declining mining supplies from South Africa and Russia are expected to create a serious global platinum deficit in 2024, according to the World Platinum Investment Council (WPIC). This shortage marks the second consecutive year of shortages due to ongoing production problems.
U.S. wholesale inflation hits highest rate in a year
Wholesale inflation in the United States reached its highest rate in a year in April. According to Bureau of Labor Statistics data released Tuesday, the Producer Price Index (PPI) rose 2.2% year-over-year, beating expectations.
Isaac Newton, renowned for his contributions to science and mathematics, also left a significant mark on British economic policy as Master of the Mint. Newton set the gold/silver ratio for the country, which lasted for over 200 years. What was the gold/silver ratio established by Isaac Newton?
A. 15 to 1
B. 16 to 1
C. 26 to 1
D. 32 to 1
Scroll to the bottom of this email for the response…
In case you missed it:
Investment managers are required to file their 13F reports with the SEC, disclosing their stock holdings, and many did so before the deadline.
Among these deposits, one stood out.
Edmond de Rothschild Holding SA added $3.6 million, split between Grayscale's GBTC and BlackRock's IBIT. The Rothschild family, with a legacy of influence in banking, played a central role in controlling the global money supply for centuries. By the end of the 19th century, they controlled about half of the world's wealth.
This shift to digital assets by such a historically significant financial entity suggests a notable shift in how these assets are viewed by some of the world's most influential financial players.
Meme stocks are making a comeback
When short interest in GameStop reached 140% of available shares in January 2021, traders on the Reddit community “WallStreetBets” took notice. Thousands of people flocked to the stock, triggering short selling, where short sellers were forced to buy shares at higher prices to cover their positions, driving prices up even more.
The phenomenon sent the price up 2,400% in just 11 trading days, making headlines and highlighting the power of retail investors in moving markets.
It seems the meme stock craze is back. Since May 1, stocks like GameStop (GME) and AMC Entertainment (AMC) have more than doubled, amid wild price swings. The Wall Street Journal says: “The catalyst for the latest frenzy was a series of posts from an X account linked to meme stock guru Keith Gill, also known as Roaring Kitty, who had not posted since 2021.”
It seems strange that a man posting a photo on X/Twitter could cause markets to move like this, but when it comes to meme stocks, all bets are off. GameStop's recent rally cost short sellers more than $2 billion in just two days, according to data from S3 Partners LLC.
The Silver Squeeze 2.0?
In 2021, some Reddit traders attempted a similar move in the silver markets, dubbed the “Silver Squeeze.” Many share the belief that the silver market is heavily manipulated by large financial institutions and banks, particularly through short positions. They saw it as an opportunity to challenge and potentially denounce this manipulation.
The belief that the physical supply of silver was limited compared to the large quantities of paper silver (silver derivatives) traded in the market. By purchasing large quantities of physical silver and silver-backed exchange-traded funds (ETFs), they hoped to create a shortage that would drive up prices.
In this case, a heavily shorted stock (usually owned by various hedge funds) is aggressively bought back (in this case, by retail investors), forcing short sellers to exit the market at a loss. This process, known as a short squeeze, can cause the stock price to rise dramatically as short sellers scramble to cover their positions at high costs.
Why the Silver Market Might Be Subject to a Silver Squeeze
The silver market has several characteristics that make it ripe for a possible crisis. Here are some of the most compelling:
- Smaller market capitalization: The silver market is significantly smaller than gold, with a market capitalization of $1.6 trillion, compared to gold's $15.8 trillion. This smaller size makes silver more sensitive to price movements resulting from coordinated buying efforts.
- High Short Interest: Much like GameStop and AMC during the meme stock craze, the silver market has a high level of short interest. With 18,524,375 shares of iShares Silver Trust (SLV) shorted, millions of people bet against silver. If retail investors target these short positions, it could trigger short selling.
- Physical supply constraints: The physical supply of silver is limited compared to the large quantities of paper silver (derivatives) traded in the market. A concerted effort to buy physical silver could create a supply shortage, driving up prices.
- Industrial demand: Silver is not only a precious metal but also an industrial metal, used in electronics, solar panels and other technologies. Growing industrial demand, combined with supply constraints, could amplify the effects of a tightening.
- A historical precedent: The 2021 “Silver Squeeze” attempt by Reddit traders highlighted the potential for retail investors to impact the silver market. Renewed interest and coordinated efforts could revive this movement.
- Hedge against inflation: Silver, being both a precious metal and an industrial raw material, is considered a hedge against inflation. Because silver has a lower price, many retail investors view it as a more accessible inflation hedge than gold.
- Beliefs about market manipulation: Many believe that the silver market is heavily manipulated by large financial institutions through short positions. Efforts to expose and counter this manipulation could lead to an increase in purchasing activity.
- Social media influence: The power of social media platforms like Reddit cannot be underestimated. Retail investors can quickly mobilize and coordinate their actions, creating significant market movements.
Theoretically, a squeeze would be more likely to occur in silver relative to gold. If you're looking for an easy way to get started with silver, InstaVault Silver might be the quickest and most cost-effective way to invest in physical silver.
You get all the benefits of owning physical silver, plus low wholesale rates on orders of any size. Your purchase is immediately assigned to you, secured in the vault and available for sale almost immediately if the markets move. To learn more about InstaVault, follow the link below.
This will conclude another weekly issue of GoldSilver Nuggets. We'll be back with more news and updates next week!
Best,
Brandon S.
Gold Silver
Isaac Newton, renowned for his contributions to science and mathematics, also left a significant mark on British economic policy as Master of the Mint. Newton set the gold/silver ratio for the country, which lasted for over 200 years. What was the gold/silver ratio established by Isaac Newton?
A. 15 to 1
B. 16 to 1
C. 26 to 1
D. 32 to 1
Answer – B. 16 to 1
By setting the ratio at 16 to 1, Newton aimed to align the British currency with the international market, thereby reducing the risk of gold or silver being undervalued or overvalued, which could lead to arbitrage and to economic instability. This ratio not only reflected the market conditions of its time, but also helped stabilize the British economy for over 200 years.