NEW YORK: Silver slumped 8% on Tuesday as small investors turned their focus away from the metal, hastening a retreat from a rally to a near eight-year peak in the previous session fuelled by a social media-driven trading frenzy.
Spot silver fell 7.7% to $26.74 an ounce by 11:51 a.m. EST (1651 GMT). On Monday, it surged 7.3% to its highest since February 2013.
“It appears that the attempted short squeeze by the smaller retail traders has at least temporarily failed,” said Kitco Metals senior analyst Jim Wyckoff, adding retail investors were now looking for other markets to impact. Contributing to the pullback, the CME Group raised maintenance margins on silver futures by 17.9% on Monday to tackle unusual market volatility. Also, posts on the WallStreetBets Reddit forum at the centre of the past week’s action encouraged traders to steer clear of silver.
“If these Reddit investors are going to try to squeeze the silver market, they’re going to have to do it this week, otherwise it’s going to be a flash in the pan,” Kitco’s Wyckoff said.
The sharp market gyrations invited scrutiny from the US commodities regulator.
“A coordinated surge in investment by retail traders into the silver market would simply raise volatility and generate small regional dislocations in supply-demand dynamics,” Goldman Sachs said in a note.
The largest silver-backed exchange traded fund, the iShares Silver Trust, added about 20 million ounces of silver to its holdings on Monday, following a record inflow of about 34 million ounces on Friday.
Spot gold, meanwhile, fell 1.2% to $1,837.21 per ounce. US gold futures shed 1.3% to $1,839.80.
Silver may weaken if gold does not move higher, HSBC analyst James Steel said in a note. The current gold/silver ratio is “well below historical averages, and investors may recognise this level as straying too far from historical norms”.
Platinum declined 3.1%, to $1,092.65, while palladium fell 0.1% to $2,243.91.
CHICAGO: US corn futures eased on Tuesday after six sessions of gains, as the market watched to see if a surge in Chinese demand would continue to erode US supplies.
Soyabeans also edged lower as traders assessed upcoming Brazilian exports against risks that rainfall will slow harvest work.
Wheat followed corn and soyabeans lower, all pressured by a firming US dollar, which reached its highest in nearly two months against other major currencies.
The most active corn futures on the Chicago Board Of Trade were down 5 cents at $5.44-1/4 per bushel by 11:29 a.m. (1729 GMT).
CBOT soyabean futures fell 8-1/4 cents to $13.57 per bushel. Wheat slipped 5-3/4 cents to $6.45-1/4 per bushel.
After the US Department of Agriculture last week reported massive sales of US corn to China, traders are looking ahead to next week’s monthly supply and demand report from the agency to see the impact of recent exports on US corn stockpiles.
“You’ve had this massive sales pace that’s taken place in the last eight days. It’ll be a historic number coming in,” said Mark Schultz, chief analyst at Northstar Commodity.
Meanwhile, soyabeans started lower, but regained midday as traders assessed the dampening impact of a stronger US dollar on exports. “The US dollar rallying will do just as much rationing as if you saw commodity values rallying,” said Karl Setzer, commodity risk analyst at Agrivisor.
Reports of lower Russian wheat prices, as traders and farmers weigh temporary export taxes from mid-February and the possibility of an ongoing levy next season, contributed to the drop in US futures. Despite Russia’s export tax, top wheat importer Egypt bought 120,000 tonnes of Russian wheat for shipment March 15-30, in addition to purchases from France, Ukraine and Romania totalling 480,000 tonnes.