US gold futures rose 1.1% to $1,858.60 a tonne.
Precious metals were also helped by a retreat in equities as hedge funds and retail investors continue to battle over valuations and European countries fight over covid-19 vaccine supply.
On Thursday, silver miners’ shares spiked and the largest silver exchange-traded fund, iShares Silver Trust, saw a frenzy of option buying after the market emerged as a target on the Reddit forum r/wallstreetbets. First Majestic surged 21% on Thursday, and rose as much as 13% on Friday.
“In the very short term, I would think people would be cautious about holding a short in precious metals, irrespective of the fundamental view/what other markets are doing,” Marcus Garvey, head of metals and bulks commodity strategy at Macquarie Group Ltd told Bloomberg.
“We are confident that the influence of retail investors on silver will not last all that long, and that ultimately industrial and institutional demand will be the key factor in the longer term,” Commerzbank analyst Eugen Weinberg said in a note.
“Short-squeezing a stock with short interest of 140% is one thing, but short-squeezing a physical commodity where market-ready stockpiles are three times average daily futures volume is another,” Adrian Ash, director of research at brokerage BullionVault told Bloomberg.
While the price of equities often relies on expectations for future performance, commodities are driven by fundamentals of supply and demand.
Buying an ETF requires the fund at some point to find more metal, oil or agricultural products to back up the trades.
“For retail investors to push up silver prices the way they did GameStop and AMC Entertainment Holdings Inc., it might take significantly more time, even with tireless buying by speculators,” Tai Wong, the director of metals trading at BMO Capital Markets in New York told Bloomberg.
“You can have as much flow as you want on the speculative side,” said Bart Melek, head commodities strategist at TD Securities said in a Bloomberg interview.
“But in the end the supply and demand will win.”
(With files from Reuters and Bloomberg)