The buying frenzy that sent silver to an eight-year high is showing signs of stalling. Silver futures in New York fell as much as 9.3 per cent as traders closed out positions after CME Group hiked margin requirements, while Reddit posters turned their attention to GameStop Corp losses amid a growing backlash against the silver trade.
iShares Silver Trust, the short-squeeze target of retail traders on Reddit last week, slumped more than 6 per cent.
Backwardation — a market structure where nearby contracts trade at premiums to later-dated ones — is easing in the futures market, and at least one European coin dealer said demand was getting back to normal after a buying surge that overwhelmed retail websites across the globe over the weekend. Analysts from HSBC Holdings Plc to Commerzbank AG had warned the rally would be hard to sustain.
Silver futures for March delivery fell 8.6 per cent to $26.88 an ounce at 10:51 am on the Comex in New York. Spot silver slipped 7.8 per cent, while gold, platinum and palladium also declined. “The rush in silver was the perfect moment to take profit,” said Georgette Boele, an analyst at ABN Amro Bank NV. Investors will liquidate their positions when “they realise that prices can’t be pushed higher.”
Goldman Sachs Group Inc reaffirmed that silver is the bank’s preferred precious metal and said the metal’s manic Monday rally was never going to be enough to squeeze the shorts as those positions are backed by physical stock.
The silver market was roiled in the past week after a series of posts on the WallStreetBets forum calling for a “short squeeze.”