How Monday's stock market silver squeeze fared

There were some significant gains but nothing like what investors saw with GameStop.

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This article was originally published on All figures quoted in US dollars unless otherwise stated.

The stock market rebounded sharply on Monday, bouncing back from losses at the end of last week. As of just after 1 p.m. EST, the Dow Jones Industrial Average Index (DJX: .DJI) was up 240 points to 30,223. The S&P 500 Index (SP: .INX) gained 60 points to 3,774, while the Nasdaq Composite (NASDAQ: .IXIC) outpaced them all with a massive 322-point gain to 13,394.

The attention on Wall Street remains squarely on the efforts of the groups of individual investors spearheading the big moves in short-sold stocks, like GameStop Corp (NYSE: GME). Over the weekend, those investors targeted the silver market, and they were largely successful in pushing prices higher. Yet the gains that investors are seeing from these silver-squeeze candidates aren't nearly as large as the moves in GameStop and other stocks were.

A somewhat muted response

Silver had a solid rally on Monday. As of early afternoon, spot silver prices climbed about $1.75 per ounce to roughly $28.75. That was its highest level in six months, but it was considerably below the eight-year high that the white metal had seen overnight before New York markets opened for trading.

Investors also saw solid gains in silver-related stocks. The iShares Silver Trust (NYSEARCA: SLV), which holds silver bullion and acts as a market-traded proxy for silver prices, was higher by nearly 9% by early afternoon on Monday. The similar Sprott Physical Silver Trust (NYSEARCA: PSLV) climbed 8%.

Silver mining stocks were where most of the biggest gains were found. First Majestic Silver Corp (NYSE: AG) picked up 22%, while Endeavour Silver Corp (NYSE: EXK) was higher by 19%, and Silvercorp Metals Inc (NYSEAMERICAN: SVM) gained 18%.

Yet even those larger moves among silver stocks didn't match up to the massive gains that GameStop saw last week. Fivefold gains don't appear to be in the cards for these silver-squeeze candidates, at least not immediately.

Are short squeezers losing their focus?

Successful investors often find that it's difficult to duplicate winning performance a second time. It's understandable that a big win on GameStop has emboldened individual investors, but they'll have to keep to the same playbook to avoid making mistakes in the future.

The silver market does have some appeal from a structural standpoint, as trading activity in the silver market dwarfs the actual production of the semi-precious metal. Silver market commentators have warned of supply-deficit conditions for a long time, which would potentially make it more vulnerable to such efforts.

What short squeezers need, though, is a firm target, and that's not readily apparent in the silver market. Concentrating on iShares Silver Trust has its own problems, but with so many silver miners, it's hard to pick a single company on which to focus efforts. Therefore, even investors who want to participate don't know exactly what to do.

Moreover, some individual investors disagree with picking silver as the next GameStop. They note that some major Wall Street institutions stand to benefit from higher silver prices, which seems to go against their stated goals.

See what comes next

It took a while for GameStop to make a big move higher, and it's premature to say that silver's rise will immediately come to an end. The folks pushing the silver squeeze need to get more organized about what they're trying to do and how they'll successfully go about doing it.

This article was originally published on All figures quoted in US dollars unless otherwise stated.

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.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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