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Should I Buy Silver Or Is It Just Another Short-Squeeze?

Caught up in the ongoing short-squeeze is a precious metal that could catch investors out if they’re not careful.

Look, ya’ll know the drill by now in relation to the market:

Up is down, time is an illusion, if you think it makes sense, it doesn’t! And now, a new player has entered the game…

Yesterday, silver prices jumped around 10% to hit a seven-year high of $29.40 per ounce. This coincides with r/WallStreetBets and Fintwit turning their attention towards the precious commodity, with the hashtag #silversqueeze doing the rounds. If this price jump is the result of another short-squeeze, then investors trying to jump on the train today should be aware that share price moves inspired by Reddit alone will likely not hold. 

If you don’t know it, don’t buy it

Here are some questions that potential silver buyers should ask themselves to see if they understand enough:

1. Do you know the difference between the overall price of silver and the mining stocks that also rely on the production and pricing of other metals, including gold, lead, and zinc?

2. Do you know the difference between investing in commodities and stocks? Commodities represent actual, physical products, while stocks represent ownerships – a part in the future cash flows of a company. 

3. Do you know that commodities are typically traded and held for a shorter duration, while stock can be held years, even decades. This difference is that commodities won’t ‘do’ anything, while stocks do.

If you don’t understand enough about the commodities you wish to trade, then you are likely putting your financial wellbeing at risk, so try to avoid the shiny silver noise today, and stick to the golden rule:

Only invest in what you know.

If you need some inspiration, here’s a quote from the world’s greatest investor, Warren Buffett, regarding commodity trading — in this case, gold:

“You could take all the gold that’s ever been mined, and it would fill a cube 67 feet in each direction. For what that’s worth at current gold prices, you could buy all — not some — all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?”

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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here