Following the epic GameStop (GME) short squeeze, the Reddit forum r/wallstreetbets (WSB) has turned its attention to the silver market. A now-removed post called for a “silver squeeze” aiming to drive the price of silver from $25 per ounce to $1,000. While the forum moderators deleted the post, the message had already gone viral, sparking intense debate and market action.
The Controversy: Are Hedge Funds Behind the Silver Squeeze?
Unlike the GME rally, the silver squeeze has been mired in controversy from the start. Numerous WSB users warned that hedge funds such as Melvin Capital and Citadel are major holders of silver, and the silver squeeze may actually be a ploy by these funds to recoup losses from their GME short positions. One popular Reddit post stated: “Citadel is the 5th largest owner of [silver]. It’s imperative we do not ‘squeeze’ it. These are hedge fund bots spamming awards.” This sentiment gained traction, leading some participants to accuse any silver-related content of being astroturfed by institutional interests.
Despite the internal strife, silver prices surged dramatically on Monday. Spot silver climbed from roughly $25 last week to $29.76 in early Asian trading, briefly breaching the $30 level and hitting a high of $30.35 per ounce. Comex silver futures also jumped, triggering a wave of speculative buying.
Physical Silver Demand Explodes
Regardless of whether the squeeze was genuine, demand for physical silver has exploded. Precious metals dealers reported unprecedented buying activity. SD Bullion said it sold nearly 10x the normal amount of silver ounces. Ken Lewis, CEO of Apmex, revealed: “Earlier in the week, our daily ounce sales were about two times normal; by the end of the week, they rose to four times. After Friday’s close, demand hit six times a typical business day and more than ten times a normal weekend day. On Saturday alone, we added as many new customers as we usually do in a week.” As a result, American Silver Eagle coins were sold out at multiple dealers, and premiums skyrocketed. On Apmex, a one-ounce silver eagle was priced at $41.66, a 45% premium over futures prices.
However, market analysts pointed out that the silver market is far larger and more complex than GME’s stock. The total market capitalization of silver is around $1.5 trillion, with massive physical inventories and extensive derivatives exposure. Whether retail traders can effectively engineer a squeeze remains highly uncertain. Jonathan Mergott, a market commentator, tweeted: “This is simple arbitrage. Silver futures are $28.67. Silver Eagles on Apmex are $41.66 – that’s a 45% premium to futures. Obvious opportunity to buy futures and stand for delivery for a 35% discount on physical, right? But when they don’t have it, futures = $41.66/oz.” This highlights the disconnect between paper and physical markets.
Regulatory attention is also mounting. Although the CFTC hasn’t issued a formal statement yet, the 2021 incident later prompted authorities to remind market participants about the risks of market manipulation. For now, the #silversqueeze hashtag continues trending globally, and the crypto-native audience watches as a new chapter in the “retail vs. Wall Street” saga unfolds.