Biggest one-day gain in more than a decade is latest sign of speculative trading that is jolting financial markets.
4 min
Online investors who spurred a trading frenzy in the shares of GameStop Corp. and AMC Entertainment Holdings Inc. have moved onto the global silver market, powering the precious metal to its biggest one-day advance in more than a decade.
Futures prices for silver in New York on Monday settled at their highest level in eight years, the latest work by a loosely knit group of speculators who congregate on social-media platforms including Reddit’s WallStreetBets. Some participants have been contending aggressive buying could power GameStop-like, quadruple-digit percentage gains in other arenas, with some chatter over the weekend focusing on the roughly $50 billion market for silver investments.
The idea of buying silver in unison was mentioned in the popular Reddit forum WallStreetBets last week, then quickly spread to other corners of the internet, even as many Reddit users said they weren’t behind the silver-market advance. Many investors piled into silver bars and coins online, along with silver-linked exchange traded-funds and shares of silver producers.
Many traders with experience in commodities say the trade is highly speculative. There is more than enough silver to meet industrial demand for everything from semiconductors to solar panels, and producers can raise output to take advantage of higher prices. Previous efforts to corner the market have ultimately preceded crashes, most famously when the Hunt brothers are alleged to have artificially boosted silver in 1979 and 1980.
Still, the recent wave of speculation is unlike anything many in commodities have witnessed in the recent past. Shares of miners like First Majestic Silver Corp. and Hecla Mining Co. have been among the stock market’s best performers recently—each rose more than 20% on Monday—while the largest exchange-traded fund tied to silver logged its biggest-ever daily inflow on Friday. Online silver dealers around the country have even reported soaring demand from retail buyers.
“It’s become like the GameStop of commodities,” said Edward Meir, a consultant focused on metals at brokerage ED&F Man Capital Markets. “It doesn’t make any sense…It could be equally ugly on the way down.”
The most actively traded silver futures advanced 9.3% to $29.42 a troy ounce, ending the day at a nearly eight-year high after briefly rising above $30 earlier in the trading session. Prices have risen nearly 15% in the past week, and Monday’s climb marked the metal’s biggest advance since 2009.
Silver’s rally echoed the recent leap in GameStop and AMC, propelled by a phalanx of individual traders gathering online. Highlighting the risks associated with these trades, GameStop shares fell 31% to $225 on Monday. Shares of the struggling videogame retailer are still up some 1,100% in the past month as traders undertake a “short squeeze,” forcing investors who had bet on share-price declines to buy back stock at higher prices to minimize their losses. That trend can add further fuel to rallies.
Professional traders are now weighing whether the flurry of demand from individuals can sustain the climb in silver—a market where trading is still concentrated in a small group of banks.
“They can cause very significant disruption because silver is a market with a history of very, very high volatility,” said Tai Wong, head of metal derivatives trading at BMO Capital Markets. “But can they replicate a GameStop? Unlikely.”
Rostin Behnam, the acting chairman of the Commodity Futures Trading Commission, which regulates markets for silver futures, said the agency is watching the action closely.
“The commission is communicating with fellow regulators, the exchanges, and stakeholders to address any potential threats to the integrity of the derivatives markets for silver, and remains vigilant in surveilling these markets for fraud and manipulation,” Mr Behnam said in a statement Monday.
Silver’s climb to start the week was even more remarkable to market watchers because gold rose only 0.7% and trading in other commodities was muted. Gold and silver often trade in similar directions and are seen as safe-haven investments during times of market turmoil.
Depositories at CME Group’s Comex—the biggest marketplace for silver futures—are brimming with almost 400 million troy ounces of silver, valued at around $12 billion at Monday’s prices. Vaults in London housed 1.1 billion troy ounces—worth $29 billion—at the end of 2020, according to the London Bullion Market Association.
Monday’s advance followed a weekend rush to buy the physical metal—which is used in electronics, jewellery and photography. Retail silver marketplaces including Money Metals and APMEX Inc. had notices on their websites Sunday saying they were unable to process new orders until markets opened because of unprecedented demand.
On Monday, many popular sites for purchasing silver and gold reported shipping delays or other purchase restrictions.
“Precious metals have never seen such a sudden surge in new interest,” said Adrian Ash, director of research at BullionVault. Over the weekend, openings of new accounts at the online marketplace for gold and silver rose to almost four times the daily average from 2020, itself a record year since BullionVault went live in 2005, he said.
Many traders and analysts are baffled by the moves in silver and said the logic behind a “short squeeze” is also questionable.
In GameStop’s case, hedge funds that had bet against the stock were forced to buy the retailer’s shares when individual investors drove the price higher to avoid bigger losses, propelling the shares even more. But for silver, hedge funds and other speculators actually have a net long position and stand to benefit from rising prices, Commodity Futures Trading Commission data show.
“This is just a speculative boom,” said Georgette Boele, senior precious-metals strategist at ABN Amro Bank.
A broad attempt by day traders to corner the market in silver wouldn’t be the first time someone has tried to dominate the precious metals market. Analysts have alleged price manipulation in the silver market going back several decades, including the episode with the Hunt brothers more than four decades ago.
Traders are also watching big inflows into the largest ETF tied to silver, the iShares Silver Trust, and other large funds. These funds and mining stocks are the easiest ways for individuals to bet on higher prices. The fact that silver futures themselves are rising shows that professionals are also trying to profit from the current excitement, traders say.
ETF buying can also add to market momentum because the traders who manage the fund must buy physical silver when investors put more money into the ETF. As a result, large inflows signal that the metal is in high demand.
Still, many professionals warn the silver rally will also end badly.
“It’s devoid of any fundamentals,” Mr Meir said.
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Nvidia’s earnings will test Wall Street’s confidence in the AI boom.
3 min
Chip makers are fighting to assure investors that the artificial-intelligence boom is racing forward. Wall Street might not believe it until Nvidia’s NVDA -0.98%decrease; down pointing triangle Jensen Huang says so.
When Huang steps up to the mic for his company’s earnings call Wednesday, he will have the world’s attention. What he says about Nvidia’s present will preview the future of AI, dictate the path forward for a tech-crazed stock market and influence an American economy increasingly tethered to hopes that the boom won’t go bust.
The $5 trillion chip maker has provided the key building blocks for AI since the launch of ChatGPT in 2022 set off a race for dominance among OpenAI, Anthropic and established Silicon Valley giants. Now, as Nvidia backstops sprawling data-center projects and an exotic money pipeline to boost chip demand, the company’s influence is arguably bigger than ever.
But there are signs of trouble ahead. Political pushback to AI is growing. A bond selloff propelled borrowing costs to their highest levels in years. The hyperscalers that include some of Nvidia’s key customers—once cash-printing machines—are relying more on debt. OpenAI recently told investors its revenue rose by a tepid 18% in the second quarter while its losses deepened.
Nvidia is increasingly stepping in to shore up potential weak points across the market. Earlier this month, the company teamed up with six of Wall Street’s biggest firms on a $500 billion AI-financing plan, pledging to backstop lending to customers that can’t afford its chips otherwise. The chip maker last week also took a stake in Cloverleaf Infrastructure, which arranges power for data centers, and struck a $6 billion deal with startup Poolside aimed at developing a powerful open-weight AI model.
After watching shares in other chip makers and the so-called Magnificent Seven tech companies swing wildly in recent months, Wall Street is hoping Nvidia can beat expectations—again. The countdown is on.
“It’s kind of becoming more and more like the World Cup final than the Super Bowl at this point,” said Brian Mulberry, chief market strategist at Zacks Investment Management. “It’s just gotten to be that big.”
The company has smashed analysts’ earnings estimates for each of the 14 quarters since the AI boom kicked into high gear. Nvidia posted 210% annual growth in net income in its last three-month period, according to FactSet, making Wall Street’s 126% projection look pedestrian.
Expectations for a blowout second quarter have risen rapidly over the course of this year. All Nvidia will have to do to beat this target: outrun 95% annual earnings growth to more than $51.5 billion. Analysts project the chip maker will report record sales of $92 billion for the period, up from a forecast of $78 billion at the start of this year.
In July, big-tech earnings sparked volatility. Concerns about runaway capital spending spread across the sector after Alphabet’s and Tesla’s results, driving a $890 billion wipeout that contributed to the unwind of hedge fund Situational Awareness. Microsoft posted the largest one-day gain in market capitalization by any company, ever, after a quarter proving that it could still show investors the money. SpaceX rocketed higher after a record-breaking initial public offering, only to see $1 trillion in value evaporate.
Surging memory prices and borrowing costs have fueled fears that those and other companies will be unable to keep plowing more money into supplies including Nvidia chips. Shaia Hosseinzadeh, founder of OnyxPoint Global Management, has recently bought dips in AI-infrastructure stocks when Wall Street has strained to absorb massive debt issued by Silicon Valley.
“The macro data is really quite robust,” he said. “Of course, there’s a level at which everything breaks.”
Investors have kept pumping money into the AI trade despite concerns around chip consumers—and to the benefit of chip producers. That is why Nvidia’s outlook for semiconductor demand could send ripples through counterparts such as Micron Technology and Sandisk, developers of the data centers in which their chips reside, and a supply chain of power producers, contractors and other specialists that underpin the globe-spanning AI build-out.
“We joke internally that we’re all Nvidia analysts now,” said David Lefkowitz, head of U.S. equities at UBS Global Wealth Management.
The irony is that investors have tended to sell Nvidia stock immediately after blockbuster earnings, with shares falling each trading session after its four past quarterly reports. Some are betting that will be the case this time around, too.
The options market is pricing in a 5.3% swing, higher or lower, in Nvidia shares during the session following earnings, according to Option Research & Technology Services. That is higher than the 4.8% average move in Nvidia’s stock over the last 12 months after the company reports quarterly results.
In recent days, some of the most actively traded Nvidia options have been put contracts tied to the stock falling from its Friday value of $214.75 to $205 and $210 apiece, according to Cboe Global Markets data. Put options give the right to sell a stock by a set price and typically represent a bearish wager.
Many analysts remain optimistic. Frank Lee, global head of tech hardware and semiconductor research at HSBC Global Investment Research, recently raised his price target for Nvidia shares to $360 from $325, citing, among other things, Nvidia’s strategic partnerships with suppliers and its role as a top contributor to open-source AI.
