Spike in silver means everyone should take the Reddit traders seriously, El-Erian says

Published Mon, Feb 1 202110:14 AM ESTUpdated Mon, Feb 1 202110:35 AM EST

Jesse Pound @/in/jesse-pound @jesserpound

The dramatic spike in the large silver market on Monday means that we shouldn't underestimate the collective power of the Reddit traders, according to Allianz chief economic advisor Mohamed El-Erian. Futures contracts for silver jumped 11% on Monday morning , on track for their biggest one-day gain since 2009, after discussion about the precious metal picked up among retail traders and high profile investors on social media over the weekend. El-Erian said on CNBC's " Squawk Box " that the move in silver suggested that retail traders could impact bigger targets than just heavily shorted stocks with small market caps. "It's a very different target, but the fact that you can move silver, such a large market, is an indication to everybody that they have to take these new technicals seriously," El-Erian said. The jump in price for the precious metal follows a volatile week on Wall Street caused in part by retail traders targeting heavily shorted stocks in an attempt to create a sharp spike in their price. The discussion around silver on the Reddit forum WallStreetBets was different from similar conversations around GameStop and AMC Entertainment . While some users were in favor of bidding up silver and the stocks of silver mining companies, others argued that the "silver squeeze" was a distraction from the Reddit trader's core positions. El-Erian said the action in silver could be a sign that the retail side of this trading frenzy is becoming less organized but may still be able to impact different parts of the market. "The fact that you can get people to look at silver, and in the process they look less at GameStop and because of that there's less worry that the hedge funds that are short GameStop are going to sell, means you can impact lots of markets," El-Erian said. "So don't underestimate in the short term the influence." The economist also said that what worried him most about the current trading frenzy was the possibility of intermediaries failing and not the actions of retail traders or hedge funds.

Mohamed El-Erian

Olivia Michael | CNBC

The dramatic spike in the large silver market on Monday means that we shouldn't underestimate the collective power of the Reddit traders, according to Allianz chief economic advisor Mohamed El-Erian.

Futures contracts for silver jumped 11% on Monday morning, on track for their biggest one-day gain since 2009, after discussion about the precious metal picked up among retail traders and high profile investors on social media over the weekend.