Everything You Need To Know About The Silver Squeeze

Silver, Bars, 5000 Grams, Real Value

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The GameStop frenzy has left many people wondering about the connotation and implications of a market squeeze. While the speculative rally kickstarted by a Reddit group is battling to take on the biggest hedge funds in the United States, a similar situation in the commodity markets is brewing. Retail traders have been formulating another coup to take on the precious metals industry, allowing silver futures to hit an eight-year high of $30.03 per ounce on Feb. 1.

Private Banks – The Primary Target 

Banks and financial institutions have amassed enormous wealth over the last couple of months, capitalizing on the increased demand for debt and digital transactions. Moreover, as the initial days of the lockdown followed by prolonged periods of social distancing have reduced the per capita consumer spending, the average bank balance in checking accounts have increased substantially over the past year.

As a result, banking institutions reported a surging unused cash availability, allowing them to sanction a higher volume of loans. On a macroeconomic level, the multiple fiscal stimulus packages and Fed’s quantitative easing programs allowed banks to scale their assets, making banks one of the most profitable entities in 2020. 

However, the main beneficiaries of the liquidity drive were the biggest multinational banks operating in the country. According to the Federal Deposit Insurance Corporation (FDIC), two-thirds of the total gains from the $2 trillion fiscal stimulus package was confined to the 25 biggest banks, with JPMorgan (JPM), Bank of America (BAC), and CitiGroup (C) topping the list.

These multinational corporations witnessed staggering growth in their overall Assets under Management, outperforming relatively smaller players who have been struggling to stay afloat. 

Shorting Silver 

The biggest investment banks are known to short precious metals such as gold and silver to keep their prices low. While such market manipulation is looked down upon, banks work alongside the Federal Reserve to keep the prices within a particular range and to maintain confidence in the US dollar. This is because extremely high prices of gold and/or silver sends distressing signals regarding the country’s financial and economic stability.  

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Disclaimer: All the information in this article - is published in good faith and for general information purpose only. Hashtag Investing does not make any warranties about the completeness, ...

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