Gold prices received a slight boost on Monday amid the market frenzy over its sister metal silver. Spot gold rose 0.8% to $1,863.70 an ounce by 11:50 a.m. EST, trading at a near two-week high. US gold futures on the Comex were also 0.8% higher at $1,865.50 per ounce.
Silver has gained 19% in price since last Thursday after posts on Reddit led small investors to buy silver mining stocks and exchange-traded funds (ETF) backed by physical silver bars, in a GameStop-style squeeze.
Retail sites for silver have been overwhelmed with demand for bars and coins as well. Dealers including Money Metals, SD Bullion, JM Bullion and Apmex said over the weekend they were unable to process orders until Asian markets opened because of unprecedented demand.
“Pretty much physical silver is almost all gone in terms of live inventory,” Tyler Wall, president and chief executive officer at SD Bullion, told Bloomberg TV.
“There are massive shortages. We’ll be completely out of stock if it carries on like this; the first time since our company opened in Singapore 7 years ago,” David Mitchell, managing director at Indigo Precious Metals told Reuters.
The buying frenzy also fed into mining shares. Fresnillo Plc surged as much as 21% in London trading. First Majestic rose as much as 24% in New York.
Small Canadian silver miner Avino Silver & Gold Mines (TSX: ASM) (NYSEAMERICAN: ASM) rose as much as 129% in New York amid the whirlwind of the so-called Reddit Revolution.
The 53-year-old company, which has a silver operation in Mexico, had disclosed last week plans to sell up to $25-million of newly issued shares into the US market.
Organized in online forums and traded with fee-free brokers, such as Robinhood, the phenomenon has driven a 1,500% rally in the shares of videogame retailer GameStop. The company had a $1.2 billion market capitalization at the beginning of the year, and on Wednesday touched $24.2 billion.
BlackRock Inc.’s iShares Silver Trust, the largest exchange-traded product tracking silver, recorded an unprecedented $944 million net inflow on Friday.
GameStop stock tumbled as much as 34% in the last days, as bearish investors appeared to cover their positions.
“Last week’s events have shown it to be unwise to doubt the purchasing power of retail investors, and this has been sufficiently demonstrated again on the silver market,” Howie Lee, an economist at Oversea-Chinese Banking Corp told Bloomberg.
“They may find it a bit harder to squeeze the silver market than they did with GameStop — the former is much bigger and more liquid — but the momentum looks like it rests with them at the moment.”
The surging price of silver threatens to boost costs for solar-panel producers, which account for about 10% of global demand for the metal.
At current prices, the metal accounts for about 4.7% of the cost of a panel.
Chinese manufacturers are also trying to boost inventory now ahead of the Lunar New Year holiday that starts next week.
(With files from Bloomberg and Reuters)