GameStop traders switch to silver, putting Australia in the picture

Silver itself is up around 50 per cent over the past year with the bulk of that rise coming in recent days.

As GameStop traders turn their attention towards silver, Australia’s only specialist silver ETF popped on Monday racking up 25 times the usual daily turnover.

Needless to say the vast bulk of that money - $47m - rolled into the fund controlled by ETF Securities - was on buy orders, as retail investors try to surf on what they hope is a global push to force up the price of the precious metal.

The shift by day traders - inspired by the Reddit website - from single stocks such as GameStop to the considerably more ambitious target of a single commodity, might well mean more direct participation by Australians investors who have a better chance of participating in the silver market than in selected US stocks such as GameStop.

In fact, local online share trading sites with a strong representation among newer investors - such as Stake - reported difficulties in servicing demand for Reddit-driven US listed stocks in recent days. Similarly, IG was forced to halt trading in related stocks.

Local commodity analysts certainly find the move on silver extraordinary.

“This is unprecedented and I don’t think anybody has any idea where it is all going,” says Vivek Dhar, director of mining and energy commodities research at Commonwealth Bank.

As the silver price opened the week more than 7 per cent higher at near $US29 an ounce, a string of silver small cap stocks also saw a spike in activity, including Manuka Resources, up almost 50 per cent, and Silver Miners up 36 per cent and Adriatic Minerals up 20 per cent.

But it is the arrival of GameStop traders into the ETF sector that is the big change for the local market.

ETFs have so far been mostly used as a conservative investment choice by long-term investors.

Kanish Chugh, head of distribution at ETF Securities, explains the silver fund tagged ETPMAG, is underpinned by the physical holding of actual silver on a dollar for dollar basis.

No doubt the presence of physical silver reassures some investors, however, it also means that as ETFs move to fulfil their responsibilities to accumulate more silver, the price of the underlying commodity will have to move up.

The big price moves in silver over recent days largely follow intense action at the giant Blackrock iShares Silver Trust, which had inflows of $US1bn in a single trading session last Friday.

GameStop traders are promoting silver as the next potential squeeze of professional investors because they believe the price of the precious metal is artificially low - often held down by investment banks and hedge funds shorting the metal.

For silver investors, the elevation of the metal to the front lines in what is seen as a battle between the big end of town and everyday investors means serious change.

The average daily turnover in the ASX-listed Silver ETF has been $1.9m up until the end of January.

It bounced to $4m a day last week before soaring to $47m on Monday.

Silver itself is up around 50 per cent over the past year with the bulk of that rise coming in recent days.

Though silver is a small market compared with gold, it has a history of unlikely speculation, the most notorious incident being the attempt to corner the market by the Hunt brothers in 1980 when it was estimated the Texan traders controlled a third of the entire global supply.

Just like the issue of what happens to GameStop stock once the traders move on, the issue of where silver will end up is now an open question.

That last major effort to move the market by the Hunt brothers ended with the precious metal falling by 50 per cent and the brothers declaring bankruptcy after a massive fine by regulators.