https://www.miningweekly.com

Hedge funds bet rally in Canadian silver-mining stocks to run out of steam

2nd February 2021

By: Reuters

  

Font size: - +

TORONTO – Hedge funds have raised their bets against Canadian silver-mining stocks, January short-selling data from a market regulator showed, while the miners' shares and silver itself rose sharply due to buying by retail investors.

A social media-driven buying spree lifted silver to an eight-year high on Monday, spurred by posts on the same Reddit message board behind last week's frenzied buying of GameStop and other shares.

But the rally later cooled on doubts about the ability of retail traders to move prices in a bigger, more liquid commodities market.

"The Reddit-fuelled trader is learning that ... the silver market is much bigger than some of the small cap stocks they have been trading," said Edward Moya, senior market analyst at OANDA.

Between Thursday and Monday, Toronto-listed First Majestic Silver and Pan American Silver soared 60.5% and 30.7%, respectively.

Wheaton Precious Metals, Fortuna Silver Mines and Silvercorp Metals Inc all had double-digit gains over the same time period.

The big rally drew the attention of short sellers who increased their bets on silver stocks to fall, indicating that hedge funds believe the rally is nearing an end.

Short trades as a percentage of total traded volume for First Majestic rose to 28.5% for the second half of January, up from 12.8% in the first half of the month, Investment Industry Regulatory Organization of Canada (IIROC) data showed on Monday.

Short positions in Pan American rose to 35.9%, from 3.3%, over the same period, while Fortuna Silver Mines saw an increase to 36.6% from 2.2%, and Silvercorp Metals to 23.1%, from 1.4%.

Hedge funds tend to bet a company share price will fall by borrowing a stock from an institutional investor, such as a pension fund, and selling it back at a lower price when the company dips in value, pocketing the difference.

Reuters reported Monday that Mexico's government plans to seek more than $500-million from First Majestic Silver as part of an ongoing tax dispute.

Edited by Reuters

Comments

The content you are trying to access is only available to subscribers.

If you are already a subscriber, you can Login Here.

If you are not a subscriber, you can subscribe now, by selecting one of the below options.

For more information or assistance, please contact us at subscriptions@creamermedia.co.za.

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION