Silver prices rallied at record levels in Monday’s trading session, fueled by a wave of fresh enthusiasm from WallStreetBets traders.
Silver futures gained as much as 8% shortly after the futures market opened on Monday, marking the biggest rise in the futures since at least 2013.
What you must know
The white shiny metal’s contracts last traded up 6.75% at $28.777.
Silver is bouncing so high after users on Reddit’s WallStreetBets forum posted about executing a “short squeeze” similar to ones attributed with triggering recent gains in other stocks popular on the internet.
- The group tagged as the Wallstreetbets is a longstanding subreddit channel founded in 2012, where many Reddit users discuss highly speculative trading strategies and ideas.
- The group had caused huge disruption to financial markets in the previous week, especially among institutional investors like Melvin Capital who recently recapitalized its fund amid its losing positions at Gamestop.
What this means: A short squeeze occurs when a significant amount of investors look to cover short positions by buying at the same time. Such buying pressure pushes the asset’s price in review higher, making investors sell such positions at a record pace in order to cover their positions, which sends the shares spiraling higher in a usual way.
The co-founder of Gemini, an American Crypto Exchange, Cameron Winklevoss recently spoke on the impact a silver squeeze had.
“The ramifications of a silver squeeze cannot be underestimated. If it’s exposed that there are more paper claims on silver than actual silver, not only would the payoff be enormous, but gold would be next. Bitcoin fixes this.”
The ramifications of a #silversqueeze cannot be underestimated. If it’s exposed that there are more paper claims on silver than actual silver, not only would payoff be enormous, but gold would be next. #Bitcoin fixes this.
— Cameron Winklevoss (@cameron) January 31, 2021
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, gave critical insights on silver’s recent price action.
“Silver closed at 27.00 on Friday and opened at 28.00/10 today. It then traded up to a handful of prints at 29.00. The futures market was so overwhelmed that it froze up a few times.
“The effort appears aimed at futures for delivery, resulting in exponentially higher EFPs (greater contango) with the market then countering by selling spot and buying futures to move deliveries out into the future.”
Oil prices surge over China’s growing appetite for energy
British based contract ticked up by 0.3% to trade at $63.59 a barrel while the WTI futures edged near $60 a barrel.
Oil prices rallied high at the second trading session of the week as data from the world’s second-largest oil consumer’s (China) import growth picked up coupled with rising tensions in the Middle East after rebels from Yemen disclosed that they fired missiles on Saudi’s energy infrastructure.
At the time of writing this report, the British based contract ticked up by 0.3% to trade at $63.59 a barrel while the West Texas Intermediate futures edged near $60 a barrel.
The world’s second-largest economy recorded impressive gains for last month in yet another boost to China’s economic recovery as global demand gained momentum. Crude oil imports into China surged by 21% in March from a low base of comparison a year earlier.
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics spoke on the parabolic of the energy market, as oil traders seem to be uninspired on the resurging COVID-19 virus;
“The oil market’s magnetic attraction to the $63 level should tell us much about the near-term outlook amid conflicting signal of new Covid waves coming to shore ahead of what should be a summer gasoline buying bonanza.
But overall, this is an oil market that feels completely uninspired outside of a few micro lurches here and there.
Still, positive comments on the US economy from Fed Chairman Powell help to reassure the outlook for oil demand, balancing concerns about the continued spread of Covid-19 in some regions.”
What to expect
Recent price actions suggest oil traders might hold the $60 a barrel baseline in the near term even if U.S Treasury yields surge while struggling to resolve with what form and fashion the next leg of the reflation trade will take.
Oil prices stay on course as Saudi’s Energy Minister reassures traders
British based oil contract traded at about $63 a barrel while the WTI futures were trading slightly below the $60 price level.
Crude oil prices remained relatively firm at the early hours of Friday’s trading session as oil traders digested Saudi Arabia’s defense of OPEC+ plans in raising output thereby capping gains.
At press time, the British based oil contract traded at about $63 a barrel while the West Texas Intermediate futures were trading slightly below the $60 price level.
Saudi energy minister Prince Abdulaziz bin Salman recently revealed that there were no pressing concerns of demand/supply dynamics changing gear amid the gradual boost in outputs in an interview aired on Thursday, adding that OPEC+ had all ammunition put in place to change course if necessary. OPEC+ will continue to meet monthly on reviewing the energy market supply dynamics.
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics spoke on the prevailing market sentiment amid macros pointing to more oil supplies hitting the sensitive energy market and an upsurge in COVID-19 caseloads.
“Positioning is much cleaner, although the market remains directionally long oil. However, the sudden calm and drop in volatility have attracted passive investors back to the fray as the market structure around prompt spreads start to tighten and the dollar begins to roll over.
“Still, the conflicting signals around OPEC+ supply coming back to market amid spiking coronavirus case numbers in India plus parts of Canada as well as Tokyo backtracking into the lockdown Abyss, together with reports linking the UK’s Covid-19 vaccine workhorse to the higher frequency of blood clots, continues to hold the bulls at bay.”
What to expect: The most recent OPEC+ agreement on releasing barrels into such present demand was not out of place – suggesting the futuristic price of oil might range between the $60 -$70 price levels with production normalization vs current high excess production capacity taken into consideration.
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