Metals Weekly Round-Up: Silver Rises on Retail Investor Sentiment

It has been a busy week for the stock market, with indexes in the US and Canada dipping dramatically on Wednesday (January 27). The volatility benefited the precious metals as gold began to claw back gains made earlier in the month.

Despite the momentum, the yellow metal is on course to end the month 4.4 percent off its year-to-date high. Meanwhile, silver neared US$28 an ounce this week — the white metal has caught the eye of some of the retail investors who have been targeting GameStop (NYSE:GME).

The market swing has weighed on the base metals sector and its ability to retain earlier highs, with broad declines sending the metals lower mid-week.

Gold opened Monday (January 25) trading at US$1,864 per ounce before falling to US$1,836 on Wednesday. Market watchers have pointed to strength in the US dollar as the cause.

The drop was echoed by the Dow Jones Industrial Average (INDEXDJX:.DJI), which shed its January gains, slipping to 30,303.17. The S&P 500 (INDEXSP:.INX) also declined mid-week when it fell to 3,750.77. In Canada, the S&P/TSX Composite Index (INDEXTSI:OSPTX) fell to 17,424.43, its lowest point year-to-date.

By Thursday (January 28), the gold price was trending higher, but remained rangebound below US$1,860, a trend Will Rhind of GraniteShares expects to continue.

Watch Rhind discuss the gold market and the factors weighing on its growth.

“Gold rallied up to US$1,950 roughly on the back of the election results, and the promise or the hope of more stimulus, but it hasn’t actually happened as of yet,” he told the Investing News Network this week. “That’s not to say that it won’t happen … but obviously as of right now, it hasn’t actually happened, so gold’s pulled back a little bit from then.”

Gold was trading for US$1,872.90 at 9:27 a.m. EST on Friday (January 29).

The silver price surged higher after hours on Thursday, rising from US$25 an ounce at 3:00 p.m. EST to US$27.59 before the morning bell.

As mentioned, its price action is connected to the same retail investors who sent GameStop stock soaring. These traders are believed to have now set their sights on silver to initiate a short squeeze.

Gareth Soloway of InTheMoneyStocks.com explained that the recent flurry of activity attributed to the WallStreetBets Reddit forum highlights the power of social media. Both #BuySilver and #BuyGold were being used across Twitter (NYSE:TWTR) on Friday morning.

Listen to Soloway explain how the GameStop stock bump could impact the silver market.

“There’s some big short positions in silver out there, and I think they’re trying to ignite that same short squeeze … (but) there’s a big difference between the market cap of silver, which is massive, compared to a stock like GameStop, which when it started was only a billion dollar company,” said Soloway.

The white metal was selling for US$27.17 at 9:42 a.m. EST on Friday.

Platinum displayed volatility for the final week of January. Thursday saw the autocatalyst metal fall to US$1,043 per ounce, territory the metal had not been in since early January. Positivity in the gold and silver markets helped push platinum out of those lows early on Friday.

After briefly touching its Monday (January 25) value of US$1,100 in pre-trading hours, the value of platinum fell back to US$1,082 at 9:48 a.m. EST.

The palladium price has been locked in a downward trend since early January, when the metal reached its year-to-date high of US$2,364 per ounce. In the weeks since then, palladium has shed some 5.7 percent. At 9:51 a.m. EST on Friday, palladium was priced at US$2,221.

With the US dollar showing resilience this week and nearing its previous year-to-date high, the base metals sector felt pressure, leading to broad declines across the space.

“With the exception of tin that remains in high ground, the rest of the base metals seem to be rolling over to the downside and if the dollar does strengthen further that might weigh on prices more,” read a Friday note from Metal Bulletin.

Copper continued to battle headwinds, eroding gains made earlier in the month. By Thursday, it had fallen from US$7,984.50 per tonne at the start of the week to US$7,778.50, a 2.5 percent drop.

“We have been expecting a countertrend move, one seems to be getting underway now and we should get a feel for how strong underlying bullish sentiment is by seeing how far any pullback goes and how long it lasts,” states the Metal Bulletin report. “Overall, we remain long-term bullish toward the base metals on account of expecting more infrastructure spending, but a correction could be quite a constructive development after such long rallies.”

Copper prices improved slightly on Friday to sell for US$7,814.

Nickel was also on track for a 3.6 percent price drop this week. The dip follows a two weeks of gains, which brought the metal to a year-to-date high of US$18,370 per tonne on January 11. By Friday, the nickel price was moving for US$17,580.

Zinc registered a dramatic drop as well, slipping below US$2,550 per tonne for the first time since November 2020. The metal ended the week trading for US$2,546.

Lead rounded out the base metals losses, falling 1.5 percent from Monday by week’s end. The price of lead was US$2,009.50 per tonne on Friday.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.