Silver squeeze next on the list for WallStreetBets, or is it?

After brokers restricted trading on GameStop (NYSE: GME) WallStreetBets and others have shifted focus – now a silver squeeze is on the cards.

| More on:
Coles Woolworths share price asx silver shares represented by silver coin being squeezed in nut cracker

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It has been a busy week for WallStreetBets as the GameStop Corp (NYSE: GME) short squeeze took the world by storm. This event has been the talk of the town as the literal manifestation of the collective little guy versus the big guy hedge fund managers.

However, it appears that the party doesn't stop at GameStop and other heavily shorted names – now the attention has turned to a silver squeeze. Yet, this time the community isn't as one-minded about this particular squeeze.

The path to this moment

Last week's GameStop mania led to Melvin Capital Management and Citron Research removing their short positions as the losses stacked up. Brokers have also found themselves under the public's microscope due to the trading restrictions imposed on a basket of stocks experiencing high volatility.

Brokers cited liquidity being the major cause for restrictions, as the high volatility could have left the brokers in a position without funds to cover the interim, increasing the value at risk (VAR).

Once restrictions were put in place, the attention shifted to other non-restricted tradeable listings, such as Dogecoin. The cryptocurrency experienced a surge of 900% in the space of one day – at which point Robinhood proceeded to restrict the trading of Dogecoin as well, as reported by Business Insider.

The result of these stoppages in momentum has pushed some of the community onto its next target, silver.

Silver squeeze in two minds

The original hypothesis on WallStreetBets titled "THE BIGGEST SHORT SQUEEZE IN THE WORLD $SLV Silver $25 to $1,000" outlines a belief that silver is manipulated to cover inflation by shorting with paper contracts.

Users on the subreddit pegged the inflation-adjusted price at $1,000. Some in the community believe this will hit the likes of JP Morgan, which settled a lawsuit not too long ago over 'spoofing' of the precious metals market.

Alternatively, there are many others in the community who see the silver squeeze as a distraction from the real agenda, which has been targeting the hedge funds. Furthermore, many believe that JP Morgan and others, such as Citadel, are actually long on silver – which means an increase in the price of the commodity would benefit them.

The price of silver and ASX silver shares is increasing

Today, the silver price is on the increase – trading up roughly 7% to a spot price of US$28.60 (at the time of writing) with silver mining companies benefitting from the push. Some ASX silver shares trading upwards today include Adriatic Metals PLC (ASX: ADT) up 14.7% and Thomson Resources Ltd (ASX: TMZ) up 38.5% at the time of writing.

Many of the popular bullion dealers, including APMEX, are currently reporting unprecedented demand for physical silver as well.

The outcome of the latest short squeeze attempt will likely develop over the coming days. But at the moment it seems that the WallStreetBets community isn't fully aligned on this one, as they were for GameStop.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

man grimaces next to falling stock graph
Share Fallers

Why did this ASX 100 stock just crash 11%?

Cleanaway shares have been on a crazy roller-coaster over the past 24 hours.

Read more »

a man in a british union jack T shirt hurdles high into the air with london bridge visible in the background.
Mergers & Acquisitions

Nick Scali shares halted amid $60m capital raising and UK expansion news

This furniture retailer has its eyes on the UK furniture market.

Read more »

An arrogant banker pleased with himself and his success winks at his mobile phone while taking a selfie
Share Market News

Are ASX 200 bank shares like CBA 'too expensive' right now?

Are banks overpriced or good value today?

Read more »

Happy couple doing grocery shopping together.
Broker Notes

Buy one, sell the other: Goldman's verdict on Coles vs. Woolworths share prices

One stock is set for a 26% share price gain over the next 12 months while the other is destined…

Read more »

Business woman watching stocks and trends while thinking
Share Market News

5 things to watch on the ASX 200 on Wednesday

Another positive session is expected for Aussie investors today.

Read more »

Businessman smiles with arms outstretched after receiving good news.
Share Gainers

Here are the top 10 ASX 200 shares today

It was another strong showing from the share market today.

Read more »

Three miners looking at a tablet.
Resources Shares

Own ASX mining shares? Experts say an upswing in commodity prices has begun

HSBC economists Paul Bloxham and Jamie Culling explain why global commodity prices are rising.

Read more »

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why Brambles, Lifestyle Communities, Northern Star, and Select Harvests shares are sinking

These shares are having a tough session. But why?

Read more »