As silver soars, Commerzbank warns of bubbles in other commodities

With silver prices soaring as the Reddit-fueled retail frenzy spills into metals, Commerzbank Head of Commodities Research Eugen Weinberg told CNBC which asset classes he thinks could be next in line.

Silver jumped more than 11% on Monday morning, on course for its sharpest single-day incline for more than 11 years. The spike has been linked to the 5 million-member Reddit thread WallStreetBets, which last week sent a host of heavily-shorted stocks skyrocketing in a bid to squeeze Wall Street hedge funds.

Speaking to CNBC’s “Street Signs Europe” on Monday, Weinberg said the buying frenzy could go on for some time, with other metals and commodities also seeing rallies.

“The excess liquidity in the system, it is likely to create bubbles not only in silver but also probably commodities and other asset classes going forward,” Weinberg said.

He suggested that the vast liquidity made available by central banks in the U.S. and Europe will continue to inflate certain asset prices.

“This rally only started on Thursday last week and we also saw that it wasn’t really only limited to the terminal markets or the futures and options market, but also went further into the silver indices or ETFs (exchange-traded funds) which also recorded, back on Friday, massive inflows,” he said.

He added that, given the link between the physical availability of silver and the market demand, the rally might also “provoke some physical scarcity at times.”

Weinberg highlighted that the Reddit rush into unfavored stocks and silver would be unlikely to have such a big effect in larger markets such as gold.

“But there are huge amounts of metals that are probably all right now on the radar screen, starting from platinum, palladium and other smaller precious (metals) which are easier to hold, easier to buy via ETFs. But it might also go towards the larger commodities,” he said.

“I wouldn’t be even excluding the likes of oil being also addressed by the retail investors going forward, although the effect on silver and other smaller markets is likely to be more pronounced.”