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LAWRIE WILLIAMS: The robinhood factor for gold and silver – an update

This is an update on an article initially published about 3 weeks ago,  Given the stellar number of accesses to a subsequent article by another author, which covers the same phenomenon, but perhaps in less detail, I am updating my original article:  Gold and silver booming as Robinhooders start to pile in – and reposting it with some further comments.  Readers may also be interested in an article I wrote on the same subject for the Seeking Alpha website, which makes some additional points as well and covers some specific stock recommendations: 

Robinhood.Com - A Potential Game Changer For Gold And Silver Investment

Let’s start with the edited version of my original article on sharpspixley.com:

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 potentially a 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.  The amounts individual investors spend on these sites may be relatively small, but volumes can be exceptionally high.

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-use 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 metals 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 ndependent robintrack.net website which, as its name suggests tracks Robinhood.com investment activity.  These precious metals counters are not generating the enormous followings of stocks like TSLA - or Ford and GE among the hoped for recovery stocks - but in terms of market impact perhaps these relatively small-scale investments are becoming increasingly significant and the recent rises in gold, and particularly silver, stocks do seem to be making their mark.

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 huge 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 primary silver miners) showed huge upticks of investor activity corresponding, no doubt, with the spectacular rise in precious metals prices over the past few days which is beginning to gain investment momentum.

The actual numbers of investors in some of these may be quite small 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.

That was my original article, but if we take some specific ETFs and stocks and enter their ticker symbols into robintrack.net we see the big SPDR gold ETF, GLD, has risen to No. 188 on the robinhood,com popularity list with over 40,000 investors – almost double the investor interest of only a month ago.  Interest in SLV has grown even more spectacularly.  Since the beginning of March it has more than quadrupled and in the past  two weeks has been rising almost vertically.  It currently ranks at No. 214 on robinhood and at its current rate of growth will probably overtake GLD within the next couple of weeks

Virtually all the precious metals-related stocks we have checked have seen a substantial rise in investor numbers on robinhood over the past few weeks – and robinhood is only one among many new easy-to-use, commission-free, investment platforms being accessed by this new breed of stay-at-home investors.  In volume the numbers are probably enormous and the more publicity the rise in gold and silver prices receives, the more new investors will enter the fray.  While the advice that markets always rise is enormously misleading as far as general equities are concerned in what is probably the worst global recession ever, gold and silver have a better chance of sustaining higher levels than most other asset classes – at least for the foreseeable future.  Once this becomes apparent to this new breed of investor, the current flood into precious metals could become a deluge.

10 Aug 2020 | Categories: Gold, Silver

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