LAWRIE WILLIAMS: Gold and silver booming as Robinhooders start to pile in

We, among others, have been somewhat mystified by the stellar performance of the U.S. equities markets given that the country’s economy is going through its worst phase ever according to some commentators.  We now suspect that this seemingly unlikely phenomenon may have been at least partly due to the impact of easy-to-use commission-free stock trading sites like Robinhood.com. This has been coupled with virus-related lockdowns which have confined many Americans to their homes and spending time seeking out things to do online to occupy their time.  Online stock trading, despite its dangers, has proved so far to be far more profitable use of home computer time than out-and-out gambling websites, although some of the stock trades through these websites are perhaps more akin to gambling than serious investment.  Indeed as tales come out of fortunes being made, coupled with the hugely misleading statements that stock markets only rise, the growth in use of Robinhood.com and similar sites seems to be accelerating pouring huge sums of money into what should be bearish-trending equity markets given the economic situation.

Indeed, this would particularly seem to account for the seemingly unstoppable uptick in the tech-focused NASDAQ exchange and the recoveries, after sharp falls, in the various Dow Jones and S&P stock indexes.  Many of the new breed of investors entering the market through these easy-to-ues trading platforms are millennials and thus perhaps more tech focused than the older breed of investor, and this focus may have in part resulted in the growth in the NASDAQ index.  Other sectors that seem to have appealed, perhaps to the gambling element, are anticipated recovery stocks, and companies in, or close to, bankruptcy in the hope these will be bailed out at a profit, but these are particularly risky investment areas and have resulted in some huge highly publicized losses by unwary dabblers.

There is the impression, though, that perhaps the Robinhood traders are becoming more sophisticated, or maybe the community is broadening to incorporate more experienced investors.  These look to be seeking out broader, and potentially less risky, investment horizons and gold and silver ETFs and stocks are becoming part of their investment horizon after being ignored early on.  If this is indeed the case, given that the precious metal investment universe is tiny in volume in comparison with the broader equities markets, this could have a huge impact on both the metal prices (via investments in the GLD, IAU, SLV and SIVR ETFs for example) and some of the more visible gold and silver stocks. 

The true speculators here could be looking at the mining juniors as well – and also the stock related ETFs like the GDX, or GDXJ.  Certainly the recent growth in Robinhood.com investment interest in some of these, can be seen in the independent robintrack.net website which, as its name suggests tracks Robinhood.com investment activity.  These counters are not generating the huge followings of stocks like TSLA - or Ford and GE among the hoped for recovery stocks - but in terms of market size these are becoming increasingly significant.

Check this out for yourselves by clicking on robintrack.net and entering your favourite gold or silver stock or ETF ticker in the search box and you will get a graphical view of recent Robinhood.com activity in these stocks or ETFs along with their stock price levels.  We tried GLD, SLV, SIVR, IAU, NEM. GOLD, HL, PAAS, GDX and GDXJ. All showed strong growth in Robinhood investor interest over recent weeks, but the graphics for the GLD gold and SLV and SIVR silver ETFs and HL (Hecla Mining as one of the most visible silver miners) showed huge upticks of investor activity corresponding, no doubt, with the huge rise in precious metals prices over the past few days which is beginning to gain investment momentum.  The numbers of investors in some of these may be quite small in actual numbers in relation to some of the most popular mainstream equities, but the silver-related ones in particular seem to be showing vertical increases and if this trend continues the impact on the metal prices (via the ETFs) and the associated mining stocks, could be another very bullish factor for precious metals investment

 

23 Jul 2020

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London - recently described as the World’s No. 2 University (after MIT).

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