Can Reddit’s silver “monkeys” beat the market?

LONDON, July 9th (Reuters) – (The seventh paragraph contains language that may offend some readers)

Kerry Kraker, 56, has worked in kitchens his entire life. Since March he has been spending around $ 100 a week – half of his money – on silver coins. He’s part of a growing social media movement that says they are buying bars and coins to protect themselves from a coming age of inflation.

Thanks to a community of like-minded silver stackers meeting on social media platform Reddit Inc., Seattle-based Kraker says he feels empowered too.

“They are so encouraging and so confident of the changes they can make,” Kraker, who lost his home in the financial crisis, told Reuters.

Inspired by the Reddit forum WallStreetBets, some of the 122,000 community are hoping to corner the market and topple what they believe to be an unjust banking system.

Market experts say this is unlikely to work – silver is abundant and central bankers in the United States and Europe expect inflation to remain in the low single digits.

But bankers don’t get through to this group.

“There’s a bit of anger, like ‘fuck the system’. If there’s a back door to wealth, I could take that door because the front door is closed,” Kraker said. “The bankers and others have basically closed this door to anyone who is not themselves.”

At the core of the movement is a Reddit community called Wall Street Silver, which was founded in January when WallStreetBets organized an uprising by the common people against the financial elite through the coordinated purchase of company shares.

Reuters spoke to more than 20 members who call themselves “silverbacks” and “monkeys” who have a home page with a picture of an army of primates on the march from the movie “Planet of the Apes” and say things like “monkeys” like shiny. “They organize“ raids ”- days when everyone goes shopping together.

The group’s founder, Ivan Bayoukhi, is a 24-year-old retired car salesman who lives with his parents in Alberta, Canada. “NOW IS THE TIME TO WAKE UP AND TAKE THE POWER BACK INTO THE HANDS OF THE PEOPLE” says one of his characteristic posts.

Silver costs around $ 26 an ounce. Stacker predict the price will rise as inflation undermines the value of currencies, demand for silver increases, and supplies run low. Some say that by buying bars and coins they can increase prices by 100% or even 1,000% until they can decide the shots against the so-called bullion banks, the big financial institutions that trade precious metals.

A march post pictured silver coins as a message to the head of JPMorgan Chase & Co, a US investment bank that dominates the precious metal trade: “KISS MY ASS JAMIE DIMON.” JPMorgan (JPM.N) declined to comment.

“In a year or two we will have millions of people on the move,” Bayoukhi told Reuters. “And then it’s over with the precious metal banks.”

“CORNER THE MARKET”

The prices of silver and gold, traditionally seen as safe deposit of wealth, have risen since 2019: gold has risen by around 40% and silver by around 70% since then. The silver stackers join millions worldwide who believe currencies are vulnerable – a fear that has grown as governments borrowed and printed money during the pandemic.

“It scares me every day when this bomb bursts,” says Tim Hack, a 23-year-old forklift truck from Germany. “Silver and gold really have an intrinsic physical value that you can even feel when you hold it in your hand.”

Posters on Reddit joined the silver fight on January 27 when posts appeared on WallStreetBets stating that if enough people buy the metal, prices could go up.

“Corner the market,” said one.

It was kicked off by an argument made on Reddit that big banks would exchange huge amounts of paper contracts for silver they don’t own and keep prices lower than they should be.

In a way, that’s right.

On the New York futures market alone, contracts for around 800 million ounces of silver are active – more than twice as much as the exchange says it is in its registered vaults, not all of which are available. Much of the silver that banks buy and sell in London, another major commercial hub, is borrowed, bankers and traders say.

If every professional who owns silver on paper were to collect their dues right away if there wasn’t enough metal, they agree. The system works because most people with contracts don’t want real metal that they would have to pay for storage and insurance. They are speculators or miners and jewelers who hedge their risks.

According to the posts on WallStreetBets, around $ 3 billion flowed into a fund run by asset manager Blackrock (BLK.N) that stores silver for investors. Blackrock said it added more than 100 million ounces of silver to its inventory in three days. The wholesale price of silver rose nearly 20%.

Much of the silver stored for Blackrock is in London. The London Bullion Market Association (LBMA), an industry association, later said there were “fears that London might run out of silver”.

Blackrock told Reuters it didn’t track where the money came from.

Reddit group founder Bayoukhi said he had watched with growing excitement, turned to his father, and said, “Why don’t I start a Wall Street silver community?”

“FAMILY FOREVER”

It is also true in Redditor’s claims that big players can influence the silver market. One trader tactic is spoofing – sending fake buy or sell orders to move prices before the real trade is made.

In 2020, JPMorgan paid $ 920 million to US authorities to settle charges that its employees had sent “hundreds of thousands” of fake orders to precious metals and treasure markets. The bank announced at the time that those responsible had resigned and had improved their compliance systems. It declined further comments on this story.

But the effects of spoofing only last seconds or minutes, said Ross Norman, a London-based former precious metals trader.

It took three days to print in January. Then WallStreetBets focused again on the stock markets; Silver calms you down. The price of silver has fallen by one dollar since the beginning of February.

Undeterred, Wall Street Silver publishes a barrage of tips, analysis, memes, photos, and encouragement. It’s only the 3,783rd largest community on Reddit, but it’s often in the top 20 for volume of posts per day.

When a new member posts, bayoukhi often answers say, “You are forever a family now.”

“HELL TIME”

Reddit shoppers are sitting at the end of a fat silver pipeline. Only about a quarter of the 1 billion ounces produced annually is used to make the bars and coins that most of them buy, analysts say. The rest is mainly used for jewelry and industrial applications.

Michael Mesaric, who runs the world’s largest gold and silver refinery, Valcambi SA in Switzerland, says the 1,000 ounce silver bars used in the wholesale market are plentiful: it is “completely wrong for retail investors to believe the market to be cornered “.

“You can develop a print on products,” he said. “But overall silver? You’ll have a lot of fun.”

Investors will be stocking a lot of silver this year, but less than they were in 2020, according to consulting firm Metals Focus. Demand in the west is strong, but in India, one of the countries with the highest consumption of silver, the pandemic is limiting people’s ability to buy, it is said.

Funds like Blackrocks stored 331 million ounces – the most of all time – in 2020, Metals Focus said in a report for the Silver Institute; Bars and coin buyers took home an additional 200 million ounces. This year, the consultancy expects funds to hoard 150 million ounces – the second highest value ever – and buyers of bars and coins to hoard 253 million ounces.

Silver coins and bars can certainly keep their value. Higher inflation should drive prices, as should increasing demand from manufacturers of goods such as electronics and solar panels, said Rhona O’Connell, an analyst with traders and brokers StoneX.

But she and others at companies trading the metal believe that predictions of $ 1,000 an ounce are out of this world.

Out of 39 analysts and traders surveyed by Reuters in April, only seven thought the price of silver would average $ 30 or more in 2022. The highest average they forecast was $ 44.

Redditors are motionless. Kraker, the restaurant worker, has started reading obsessively about inflation, money supply, and other economic data. “There’s a monster around the corner,” he said. “I’m trying to sharpen my stick.”

(Corrected this story to add the omitted word “million” in Section 2.

Peter Hobson reported from London; Edited by Veronica Brown and Sara Ledwith

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