Silver futures jumped almost 12% on Monday to over $30 per ounce following strong gains over the weekend. That exuberance spread to companies that mine precious metals, especially silver. Shares of Pan American Silver surged more than 9%, First Majestic Silver rose 18.7%, Hecla Mining spiked 21.8%, and Coeur Mining soared 17.6%.
On Twitter, #silversqueeze began to trend as just the latest anomaly to emerge from the "WallStreetBets" forum on Reddit.
The online army of Reddit traders have banded together for the past week to pour money into out-of-favor companies such as GameStop and AMC. In the process, they've done heavy damage to hedge funds that had bet the shares would fall in a stunning reversal of financial power on Wall Street.
But the rush into silver futures has created confusion amid the chaos, with some retail traders on Reddit calling the surge in commodity prices a "false flag."
"IT'S A TRAP!" one Redditor warned.
Some of these smaller traders believe the hedge funds that were pillaged last week are behind the surge in silver. Communications on messaging boards claim hedge funds have now become active on Reddit anonymously, attempting to drive them out of GameStop bets and into silver, but only after hedge funds had taken huge positions.
If it is a trap, no one can say for sure.
The number of GameStop shares that have been shorted (bets that the stock will fall), were slashed by more than half in recent days, according to a report Monday by the analytics firm S3 Partners.
Shares of GameStop Corp., which signaled a seismic and perhaps short-lived power shift in financial markets, fell 20% Monday. But the stock price, as it has been for more than a week, is tremendously volatile. The price was up sharply before the opening bell.
The battle over GameStop, according to Morgan Stanley, may have played a part in igniting a market correction.
The "correction has arrived," wrote analyst Michael Wilson, saying that in addition to other market forces, aggressive short squeezes have "led to a significant degrossing by hedge funds,"
"Markets corrected 3-5% with many of our favored trades taking a much needed and expected hit," Wilson wrote. "This is normal in an exuberant bull market, but we don't think the correction is over until leverage is reduced further by both institutional and retail investors."
Analysts who monitor silver markets say there is more to the story than small investors rushing in.
"The asset is traded by a variety of institutional players and it is very likely that those parties have joined the move to push the metal higher," wrote Boris Schlossberg of BK Asset Management.
The silver market frenzy extended to physical demand, with coin dealers reporting delays in deliveries as they were overwhelmed by new orders.
The Silver Mountain, a Netherlands-based bullion dealer, said on its website that, "Due to extreme market volatility we cannot accept any new orders at this moment," adding it hoped to reopen by the afternoon.