It will be an interesting week in the silver market. Over the weekend, silver received the attention from wallstreetbets, a Reddit community self-described as “for making money and being amused while doing it.” In the previous week, they began purchasing Gamestop (GME), causing the price to skyrocket. On Monday, January 25th, 2021, the stock was trading at $69.40. Three days later on Thursday, Jan 28th, it skyrocketed to $438.67 per share.
The move shocked many hedge fund managers, who held large short positions in the stock. Short positions are chosen when the belief is the stock will go down. On the flipside, a long position is held when the belief is the stock will rise in value. As a result of the dramatic increase in share price, many hedge funds had to scramble to cover their positions, One hedge fund, Melvin Capital lost 53% of its value, and had to receive a $2 billion bailout from investors.
What About Silver?
Could silver see a similar price runup? Time will tell. Most silver dealers around the world halted the sale of physical silver because their supply had dwindled as described by the CEO of AMPEX:
In the last week, we have seen a dramatic shift in Silver demand from our customers. For example, the ratio of ounces sold per day was running about two times earlier in the week and closer to four times the average demand by the end of the week. Once markets closed on Friday, we saw demand hit as much as six times a typical business day and more than 12 times a normal weekend day. Combined with the extremely high demand levels, we are also seeing a surge in new customers. On Saturday alone, we added as many new customers as we usually add in a week.
Any Precious Metal dealer will take a long position in the futures market to protect against spot price exposure when the markets open. We do this because it is our goal not to take a speculative position on metal. The weekends are unique as we are not able to real-time hedge our position. We took an aggressive position this weekend, but clearly could not have predicted the volumes that were seen. We have partnerships around to world that allowed us to cover these long positions, but only to a point. Once we exceeded our comfort levels, we had little choice but to stop the sale of Silver on our website. This was a difficult decision to make and unprecedented in our history.
As we evaluate the markets, it is difficult to know where Silver’s price and demand will go in the coming day and weeks. APMEX is highly capitalized and has more than $150 million in inventory to support demand. We have made strategic decisions to procure additional metal, locking up any metal we can find in the market place. We suspect premiums will rise and rise quickly, as we are seeing significant increases in our costs, when we can even locate the metal. It is also highly likely that we will need an additional day or two to fill orders based on current order counts. The one guarantee we can make to our customers is that you will only be sold metal that is on-site, or we have procured the metal with a firm commitment date from our partners. In markets like this, we feel this is the best approach a retailer can take, as no one can predict product availability.
We want to thank our customers for their patience and understanding during these turbulent times. APMEX prides itself on best in class service and delivering on promises to our customers.Regards,
No one truly knows what will happen with silver, but there’s one fact that can’t be overlooked: silver was heavily manipulated by J.P. Morgan for 8 years and fined $920 MILLION dollars for their crimes by the Department of Justice. Many feel silver’s price has been suppressed for years, and this “silver squeeze” will cause its price to rise to where it should naturally be.
Silver is also in short supply at many dealers or already sold out. This brings up an important point about silver as an investment:
Precious metals such as gold and silver have been used as money for centuries. Today, they are often used as a hedge against inflation. Many believe both metals retain their value when the dollar becomes weak, or as a way to preserve wealth when the stock market crashes.
Here’s something else to consider:
Most people here are focused on Reddit, GME, and silver STOCKS, but the chain reaction this could cause is much bigger than people realize. Seeing how silver is used in all types of products, such as cell phones, cars and green technology. There is a worldwide halt on physical silver. You can’t buy it from any reputable dealers. If companies can’t get it, it could affect the WORLD economy on a much bigger scale than a stock that sells video games.
In previous blogs, I wrote about accumulating assets to protect oneself against the weakening dollar and fiat currency. The rationale was if the dollar crashes, you would still have your gold or silver, and could use it to purchase other assets as the purchasing power of the dollar falls, inflation increases, or other assets become cheap. To see that article click HERE.
Silver Squeeze Investment Strategies
Silver’s all time high is around $50/ounce. Today, silver trades around $29/ounce. Many believe there’s a good chance the price of silver could reach its old high or even surpass it. And unlike Gamestop, the chances of silver going to zero are slim to none: silver is real money, and along with gold has been used as such for thousands of years. (The American Silver Eagle coin has a $1.00 face value.)
If dealers run out of physical silver, the prices of the precious metal could increase significantly due to increased demand. No one knows for sure how high it will go, or how long they will stay at the higher levels. But like gold, silver is money. Real money. This means if the price greatly increases, the average silver investor would not trade it for fiat currency. Remember: the silver is purchased to protect a person’s wealth from a weak dollar or currency.
Selling your gold or silver and putting it back into cash defeats the purpose of buying it in the first place: the goal is to get away from the current fiat monetary system, not sell your silver and go right back into it long term.
In other words, this increase in silver price could create opportunities to buy other assets that either maintain their value or generate revenue, such as real estate, franchises, gold, cryptocurrencies, or other assets.
The potential rise in silver could be something we’ve never seen before and may not see again for quite some time. It could be weeks before orders for silver are filled and people get their bars or coins. The lesson here is simple: this could happen again. There could be another silver shortage and the price of silver could increase. The key as with any event is to learn from it. If/when prices come down again, consider purchasing silver, even in small amounts via dollar cost averaging. There is talk that silver could reach $1000/ounce. That would be a tremendous gain that could create even more wealth building opportunities.
The potential rise in silver prices and shortage of physical silver was caused by traders on Reddit. Next time, it could be caused by something more serious, such as a crash in the fiat monetary system or The Great Reset. If that happens, the effects may be more severe and longer lasting. We must take note of today’s events with silver and be prepared for any future uncertainty.
Unfortunately, this type of thinking is not taught in school or discussed in mainstream media. It’s critical we learn everything we can about money, and not rely solely on the stock market for our wealth and prosperity. The average millionaire has at least 7 streams of income. Not 7 jobs, 7 sources of income. This includes passive income streams as well gold and silver.
As the world changes, we must be ready, willing, and able to change along with it. It’s critical you don’t rest on your laurels and continue learning about the economy and stay abreast of current events that pertain to money and the economy. Start now before its too late!
Get more great tips in my book Invest For Success: Winning Wealth Strategies Not Taught in School. Available on Amazon.
Teach your kids about money and business as well. They will have to live in this world as well. Many of the most important topics on business and entrepreneurship are not taught in school. Pick up a copy of Planting Seeds: The Children’s Guide to Entrepreneurship today. We owe it to our kids to give them the best opportunities to excel. This book is available on Amazon in English, French and Spanish.