It turns out that surges in silver stock prices and volumes on Friday at the ASX was just a curtain-raiser for Monday’s action.
After a weekend of a news flood that the Reddit crowd — who haven’t yet finished inflicting pain on hedge funds for the shorting in the cases of GameStop and others — has now reportedly turned their attention to silver, Australian investors kept bidding up local pure or semi-pure silver plays after the market opened on Monday.
Of course, the action is being ratcheted up by the fact that there are so few junior silver plays on the ASX, the sector having been beaten down over two decades by a lack of investor interest.
Until now, of course.
These activist investors in the US, most of whom seem to be readers of the Reddit news and discussion site, want to show the big Wall Street banks — which are reported to hold huge short positions in silver, and which suppresses the price of the metal — a lesson.
In short, they are being urged to buy physical silver or buying futures with the aim of demanding delivery (rather than the usual profit or loss taking) from the other side of the deal — and forcing up the silver price, causing considerable pain to the counterparty while covering the short position.
Physical silver in US in short supply
This is all built on the belief that the volume of silver covered by paper contracts is far greater (one claim has been as large as 250 times) than the amount of physical silver available.
The playbook: squeeze the shorts — and JP Morgan is the most often mentioned “bad guy” in silver shorting — and the shorters will either collapse or go broke trying to cover with physical metal.
Indeed, the Reddit crowd have really got the silver bit between their teeth and have been egged on by such unlikely predictions as silver going to US$1,000 per ounce (A$1,300/oz) instead of the present US$28/oz (A$36/oz) or thereabouts.
Given that silver has crested US$50/oz (A$65/oz) only on a couple of occasions — and been swiftly beaten back down — US$1,000 seems way more than a stretch.
But, a few months ago, so would have been a prediction of GameStop shares going north of US$500 (A$655).
Several large US bullion chains have put up notices on their website that they have no silver available due to “unprecedented demand”.
News reports quote brokers saying that silver holders have stopped selling, and there is no stock coming in.
Silver flash mob out to get Wall Street bankers
This latest phenomenon of the battlers against the big institutions has turned from “Occupy Wall Street” to something more like “Bankrupt Wall Street”.
Some liken it to another form of Trumpism — the little guy taking on the big guy, the banks and hedge funds being regarded as part of the “deep state” that wants to keep all the power and money to itself.
Several GameStop participants have posted stories explaining they attacked the hedge funds due to the fact that members of their families lost everything in the 2008 Global Financial Crisis, while the hedge funds were bailed out.
Yes, they see a good profit but better still is the prospect of scaring the hell out of Wall Street.
GameStop and now silver — it’s personal.
FOMO hits Australian silver stocks
The promise of a silver squeeze has sent a whirlwind through local silver stocks — even though most of them are still a way from actually producing any of the metal.
By late morning trade on Monday, Silver Mines (ASX: SVL) stock had risen by 30%.
And that followed huge turnover in that stock last Friday.
The company has the large advanced Bowdens project in New South Wales. It has a mineral resource of 128 million tonnes at 40 grams per tonne of silver, 0.38% zinc and 0.26% lead.
Golden Deeps (ASX: GED) owns ground adjoining Bowdens and last year identified a mineralised trend that continued into its project area.
Today, its shares were up 20%.
Investigator Resources (ASX: IVR) saw a 19.5% lift in the first hours of trade on Monday, again after a big price and volume jump on Friday.
The company has the Paris project, which it claims to be Australia’s largest undeveloped silver deposit.
Manuka Resources (ASX: MKR) is redeveloping the Wonawinta mine near Cobar, originally opened by the former Cobar Consolidated Resources. It plans to be in production by mid-2021 and, in the second half of this year, become what it describes as Australia’s largest primary producer of silver.
The largest silver producer in Australia will, however, remain to be South32 (ASX: S32) with its Cannington mine in Queensland, where it is mined along with lead.
Rimfire Pacific Mining (ASX: RIM) was up 10% on Monday morning, its Sorpresa gold-silver project in northern NSW now obviously gaining some fresh attention.
Mexico gold-silver explorer Mithril Resources (ASX: MTH) saw its shares gain 15% in morning trade.
Even mothballed projects are part of frenzy
Azure Resources (ASX: AZS) last year mothballed its silver (and gold) plans in Mexico due to COVID-19 and instead bought projects in Western Australia.
Last week, Azure’s latest quarterly noted the Mexico projects remain on care and maintenance “due to the severe and deteriorating COVID-19 situation in that country”.
No matter — up 20% went its shares in Monday morning trade.
Argent Minerals (ASX: ARD) was up more than 24%, and no doubt thanking itself for last year reviving its silver hopes at the Kempfield project in NSW.
But the winner in the morning’s silver trade race was Thomson Resources (ASX: TMZ) which is now in the process of acquiring the Webbs and Conrad projects in NSW.
Its stock had risen 42% by just after midday.
In November, Thomson, formerly known for its gold and tin interests, announced it was joining the growing primary silver exploration sector by acquiring two historic mine projects in northern NSW, once Australia’s silver elephant country.
Silver Mines is vending the Webbs and Conrad silver projects in return for a 19% stake in Thomson.
Silver gains outpace gold
Silver futures began trading in New York again this morning (our time) and were up 7% at one stage.
Since 1 February last year, silver prices are now up 55% against gold’s gain of 16.6%.
But here’s a final thought.
It is said the global economy is recovering, and the industrial production is coming back (as it already has in China, if figures can be believed).
Economic recovery means greater demand for silver as an industrial metal, so that would have given the metal’s price a lift anyway.
Now that recovery may just exacerbate the planned silver squeeze.