Ilya Naymushin/Reuters
- Silver slid 7% from Monday’s 8-year high, as the effort to jack up the price faltered.
- Analysts said day traders faced an uphill struggle to maintain price rises in such a deep market.
- GameStop and AMC shares also fell, as the Reddit-driven retail frenzy lost steam.
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The silver price tumbled 7% from an 8-year high on Tuesday, as efforts by retail traders to jack up the price fizzled out, and other day-trader targets such as GameStop slumped.
On Monday, silver rose as much as 13% to above $30 an ounce, as amateur investors piled into the market, causing exchange-traded funds to surge and some online retailers to restrict transactions.
The rally in silver appeared to be a continuation of the day-trading frenzy that drove GameStop shares 400% higher last week, with the hashtag #silversqueeze trending on Twitter.
Yet the rally lost impetus on Tuesday morning, with the benchmark silver futures price sliding 7.2% to $27.30 an ounce as of 9.45am ET.
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CME Group, which runs the Chicago Mercantile Exchange, increased the margins investors need to post to trade silver futures by 17.9% on Monday, which analysts said tamped down activity.
BlackRock's iShares Silver Trust exchange-traded fund fell sharply, opening sharply lower on Tuesday at around $25.28 after closing on Monday at $26.76.
Analysts said the rapid turn-around in the price of silver showed the difficulty retail traders face in trying to drive up the price.
Part of the energy behind the silver rally on Monday was that day traders on Reddit and elsewhere had encouraged each other to buy up the metal in the belief that major financial institutions are betting against it.
Many members of the Wall Street Bets forum criticised the idea of targeting silver, however, saying the focus should remain on GameStop. Some noted that major Wall Street banks, and the hedge fund Citadel Advisors, were the biggest holders of the iShares Silver ETF.
Bank of America strategist Michael Widmer said in a note there were signs that silver purchases "in recent days have come from both the retail and institutional space."
Adrian Ash, director of research at precious-metals platform BullionVault, told Insider that the sheer size of the silver market was a major problem for day traders thinking of targeting the metal.
"While silver is much more volatile than gold - with wholesale volumes only one-seventh the value - [it's] still massively larger than GameStop at $8 billion per day," Ash said.
GameStop shares slid 42% at the opening bell on Tuesday morning to around $125.00 as the retail frenzy appeared to peter out. Movie theater chain AMC was down around 40% to around $8.