Tags: sliver | investing

Short-Squeeze In Silver: Not The Main Bull Driver for Long-Term Investors

illustration of silver bullion bars with growing chart
 (Olivier Le Moal/Dreamstime)

By    |   Wednesday, 03 February 2021 05:16 PM EST

With so many financial news headlines centered on the volatile trading activity that has been witnessed in stocks like AMC Entertainment (NYSE: AMC) and GameStop (NYSE: GME), it might be surprising to see that precious metals assets have started to emerge as another potential resource for retail traders focused on attacking Wall Street's short-sellers.

However, prudent investors with goals of achieving enhanced portfolio security should understand that these events probably mark temporary trends that will likely prove to be unsustainable over time and that true market manipulation in a sector as large as the global commodities space is something that might not even be possible in practical terms.

For these reasons, long-term investors seeking fortified assets with a proven ability to withstand the tests of short-term market conditions characterized by volatility and uncertainty should still consider building exposure to precious metals assets. Overall, market analysts seem to agree with this sentiment, and investors must remember that questionable strength in U.S. economic growth figures suggest that stock market volatility could continue into the second half of 2021.

In the Beginner's Guide to Buying Gold and Silver, precious metals expert Tony Davis explains why many of these factors can be protected by investments in precious metals:

“When it comes to investing, gold tends to be counter-cyclical. This means that its value often increases during recessions and other times of economic uncertainty. Gold is also useful as a hedge against inflation because it is a hard asset that is traded internationally in dollars. If the dollar becomes less valuable because of significant inflation, gold's spot price will increase proportionally.”

Of course, these are important points for investors (in all asset classes) to remember when trading in the current environment. It might be easy to forget that we are still coming out of a heavily destructive coronavirus pandemic that has devastated the global economy in ways that have not yet been fully calculated.

However, these factors are perhaps most important for gold and silver investors because it's often very easy to become caught up in a moment and begin to make irrational trading decisions based on the most recent trends that are being covered by commentators in the financial news media.

Fortunately, it's clear that there are still strong fundamental arguments supporting the outlook for precious metals, and they have very little to do with the current prospects for a short-squeeze in silver assets. Ultimately, the prospects of long-term rallies in silver and gold go far beyond what we are likely to see in the aftermath of any short-selling activities directed toward GameStop or AMC Entertainment — and this is where the prudent investor's attention should be focused when making the decision to add exposure in precious metals assets in the current market environment.

Richard Cox is a personal investor with more than two decades of experience in the financial markets. He is a syndicated writer, with works appearing on CNBC, NASDAQ, Economy Watch, Motley Fool, and Wired Magazine.

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RichardCox
With so many headlines centered on the volatile trading activity in stocks like AMC Entertainment and GameStop, it might be surprising to see that precious metals assets have started to emerge as another potential resource for retail traders focused on attacking Wall Street's short-sellers.
sliver, investing
495
2021-16-03
Wednesday, 03 February 2021 05:16 PM
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