Silver Prices Leap After GameStop Scheme
Editor’s Note: By now, I think we all know what happened to GameStop (NYSE: GME) stock over the course of the past few weeks. And today, our friend Rich Checkan, president and chief operating officer of Asset Strategies International, is here to explain what happened when these traders turned their focus to silver.
Though the price of the precious metal shot up initially, the surge didn’t last very long. And Rich can tell you why.
Read on for his insights…
– Kaitlyn Hopkins, Assistant Managing Editor
Over the past few weeks, the Reddit group WallStreetBets has been garnering quite a bit of attention.
In an effort to save some of their dearly beloved brands as they stick it to the hedge funds, WallStreetBets activists had a serious impact on the prices of GameStop (NYSE: GME), AMC Entertainment (NYSE: AMC) and other stocks.
They also put the fear of God in a few hedge fund managers and the market in general.
This classic David-and-Goliath story resulted in GameStop’s market cap rising from less than $3 billion to around $22.67 billion. And it is estimated that assorted hedge fund losses were somewhere around $19 billion.
On Wednesday, January 27, rumors started to circulate. The word was that the WallStreetBets folks were switching their target to silver.
Despite a number of denials from WallStreetBets, the rumor mill was in full gear. Other investors started jumping into the pool as well. After all, they had seen what was possible with GameStop and wanted a front-row seat for the move on silver.
I’m certain that most thought it was worthwhile to see where they could take the price of silver before all was said and done.
In the end, investors had a small impact on the price. I’m not sure how much was a result of WallStreetBets investors and how much was a result of various other market participants along for the ride.
But the ride was as thrilling as it was short-lived.
Silver closed on Tuesday, January 26, at slightly more than $25 per ounce. It reached a peak the following Monday at just less than $30 per ounce. By that Thursday, silver closed at $26.60 per ounce.
Much ado about nothing.
The Impact on Silver
After a week with a flurry of activity, nothing really changed.
If silver was in fact the target of the WallStreetBets folks, it was a bad choice. Silver’s market capitalization is much larger than GameStop’s. The silver market is about $1.46 trillion.
Those who jumped in to see where the price could go will be fine in the long term, but they are surely disappointed with their little experiment.
Short-term noise can always have an impact on a market, but the trend is so much more important.
In silver’s case, we are in the early stages of a bull market that is expected to last another five to seven years. The current price is not quite 100% higher than the lows of $13.83 we saw in December 2015.
That’s one-tenth of where most people believe silver will be at the end of this bull market because it is one-tenth of the 1,000% appreciation we saw in silver from 2001 to 2011.
Despite the price action during the end of January, this bull market is alive and well… and worth participating in.
My View From 30,000 Feet
For me, the important point about this little bit of financial market theater has nothing to do with silver or GameStop. It is an indicator of a wider problem we are seeing play out in a number of different ways.
Plain and simple, people are generally unhappy with the status quo.
We are seeing it socially. The violence associated with the Black Lives Matter movement and the storming of the Capitol doesn’t occur when people are happy with the way things are.
We are seeing it politically. And the dysfunction in Washington – present for many years at this point – has reached a rather embarrassing climax.
We are seeing it in currencies. The U.S. dollar has lost 13% of its value in less than two years. People are losing faith in mismanaged fiat currencies around the world. It should be no surprise that gold, silver, Bitcoin and other cryptocurrencies are all surging. People want to trust their money.
And, as of late, we are seeing activism in the financial markets. The Wall Street insiders have been making a killing at the expense of the little people. They received bailouts. They got easy money by the truckloads. The little people got nothing. Then their jobs were shut down.
Mobs are forming in protests, political factions, alternative currencies and financial buying pools.
The status quo is not acceptable. The mob is speaking. Hopefully, someone will listen.
In the meantime, I’m speculating in Bitcoin and banking my speculative profits in gold and silver.
Consider following my lead.
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