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How Monday's Stock Market Silver Squeeze Fared

By Dan Caplinger - Updated Feb 1, 2021 at 1:52PM

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There were some significant gains but nothing like what investors saw with GameStop.

The stock market rebounded sharply on Monday, bouncing back from losses at the end of last week. As of just after 1 p.m. EST, the Dow Jones Industrial Average (DJINDICES: ^DJI) was up 240 points to 30,223. The S&P 500 (SNPINDEX: ^GSPC) gained 60 points to 3,774, while the Nasdaq Composite (^IXIC 3.34%) outpaced them all with a massive 322-point gain to 13,394.

The attention on Wall Street remains squarely on the efforts of the groups of individual investors spearheading the big moves in short-sold stocks, like GameStop (NYSE: GME). Over the weekend, those investors targeted the silver market, and they were largely successful in pushing prices higher. Yet the gains that investors are seeing from these silver-squeeze candidates aren't nearly as large as the moves in GameStop and other stocks were.

Gold and silver kilo bars next to each other.

Image source: Getty Images.

A somewhat muted response

Silver had a solid rally on Monday. As of early afternoon, spot silver prices climbed about $1.75 per ounce to roughly $28.75. That was its highest level in six months, but it was considerably below the eight-year high that the white metal had seen overnight before New York markets opened for trading.

Investors also saw solid gains in silver-related stocks. The iShares Silver Trust (SLV 0.72%), which holds silver bullion and acts as a market-traded proxy for silver prices, was higher by nearly 9% by early afternoon on Monday. The similar Sprott Physical Silver Trust (PSLV 0.28%) climbed 8%.

Silver mining stocks were where most of the biggest gains were found. First Majestic Silver (AG 5.67%) picked up 22%, while Endeavour Silver (EXK 6.97%) was higher by 19%, and Silvercorp Metals (NYSE: SVM) gained 18%.

Yet even those larger moves among silver stocks didn't match up to the massive gains that GameStop saw last week. Fivefold gains don't appear to be in the cards for these silver-squeeze candidates, at least not immediately.

Are short squeezers losing their focus?

Successful investors often find that it's difficult to duplicate winning performance a second time. It's understandable that a big win on GameStop has emboldened individual investors, but they'll have to keep to the same playbook to avoid making mistakes in the future.

The silver market does have some appeal from a structural standpoint, as trading activity in the silver market dwarfs the actual production of the semi-precious metal. Silver market commentators have warned of supply-deficit conditions for a long time, which would potentially make it more vulnerable to such efforts.

What short squeezers need, though, is a firm target, and that's not readily apparent in the silver market. Concentrating on iShares Silver Trust has its own problems, but with so many silver miners, it's hard to pick a single company on which to focus efforts. Therefore, even investors who want to participate don't know exactly what to do.

Moreover, some individual investors disagree with picking silver as the next GameStop. They note that some major Wall Street institutions stand to benefit from higher silver prices, which seems to go against their stated goals.

See what comes next

It took a while for GameStop to make a big move higher, and it's premature to say that silver's rise will immediately come to an end. The folks pushing the silver squeeze need to get more organized about what they're trying to do and how they'll successfully go about doing it.

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Stocks Mentioned

First Majestic Silver Stock Quote
First Majestic Silver
AG
$8.01 (5.67%) $0.43
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$11,607.62 (3.34%) $375.43
iShares Silver Trust Stock Quote
iShares Silver Trust
SLV
$19.51 (0.72%) $0.14
Endeavour Silver Corp. Stock Quote
Endeavour Silver Corp.
EXK
$3.53 (6.97%) $0.23
Sprott Physical Silver Trust Stock Quote
Sprott Physical Silver Trust
PSLV
$7.20 (0.28%) $0.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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