Shares of First Majestic Silver (AG) climbed 21.38% Thursday, January 28, as silver futures climbed on a post on Reddit suggesting profiting from a short squeeze on silver. “Any short squeeze in silver paper shorts would be EPIC,” a post on Reddit’s WallStreetBets forum said. “Why not squeeze SLV to real physical price,” the poster said referring to the iShares Silver Trust ETF (SLV). That ETF closed up 5.55% on Thursday.
Now I understand the attraction of anything that can be touted as a potential for a short squeeze like that which has driven the shares of GameStop (GME) up 928% for 2021 as of the close on January 28, and 1538% in the last three months.
But silver the commodity is actually very different from a stock and a short-squeeze looks very difficult to execute in silver.
One thing that has helped the short squeeze on GameStop immensely is that short-interest in the stock had climbed to 140% of outstanding shares. Shorts were borrowing shares to short everywhere they could, even, the numbers suggest, from other shorts.
Silver, on the other hand, is a physical commodity where market-ready stock piles stand at 3 times the average daily futures volume, BullionVault told MarketWatch.
The market gave a bump to all precious metals on Thursday with shares of the VanEck Vectors Gold Miners ETF (GDX) moving up 2.58%.
But, last time I looked, a gain of 21.38% is substantially greater than a gain of 2.58%.
I added First Majestic Silver to my Jubak Picks Portfolio back on July 26, 2019 as a hedge against future inflation and a falling dollar. Inflation has been slow to materialize (there isn’t any of significance at the moment) but I still like silver and gold as long term plays on a weaker dollar and the return of some inflation with a recovery from the pandemic.
But a 21% gain in one day in a metal stock that hasn’t been going much of anywhere lately (the 25.45% gain for the year to date as of January 28, is basically all due to yesterday’s move) is too much of an opportunity to ignore. I’m taking my profits in this position–a gain of 45.52% for the life of the position as of yesterday’s close–by selling shares tomorrow, January 29. I’ll look to either rebuy these shares in the future or to put the money to work in one of the stocks most likely to gain as the market weighs winners from an end to the pandemic sometime in 2021 (we all hope.)
