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Silver prices tumbled on Monday, dragging down gold and other precious metals, as a record-breaking rally went abruptly into reverse.
Spot silver prices were down almost 9 per cent by late afternoon trading to just above $72 a troy ounce, on track for their biggest one-day fall since the Covid pandemic, all but reversing the gains it had made during the thinly traded Boxing Day session.
The decline spilled over into gold, which slid more than 4 per cent to just above $4,300 a troy ounce, dragging it down from the string of record highs it had reached in recent sessions.
Traders said the move reflected both profit-taking after a strong run, and a reaction to a notice issued by CME on December 26 indicating that margin requirements for a range of metal futures contracts, including silver and gold, are set to rise after December 29. The higher margins raise the cost of holding leveraged positions, prompting some traders to pare back exposure.
Rushabh Amin, a multi-asset portfolio manager at Allspring Global Investments, said a combination of the higher margin requirements, thin liquidity and other factors were “working against not just silver but bleeding into other precious metals”.
“This is not a blow-off top, per se, but a very strong consolidation,” he added, referring to a market term for a steep drop that follows a speculative surge.
The sell-off followed a record rally in the metal, as investors moved into haven assets as a refuge against geopolitical tensions and worries over the debasement of traditional currencies such as the US dollar. Spot prices breached $80 a troy ounce for the first time in early trading on Monday, from $50 as recently as November.
Analysts have seen signs of a speculative bubble in precious metals, as investors rush into asset classes with a constrained level of supply. The metals have also been boosted by US interest rate cuts that have sapped the relative attractiveness of dollar assets.
Ole Hansen, head of commodity strategy at Saxo Bank, said silver’s rally had become “parabolic”, leaving the market vulnerable as margin requirements, while rising, remained low by historical standards.
In a sign of growing attention on silver’s surge, Elon Musk wrote on X on December 26 that higher prices were “not good”, citing the metal’s widespread industrial use.
In a December 29 note, UBS said gold’s surge had been driven in part by “seasonal liquidity” and demand for real assets, warning that prices were trading at an “elevated premium” after the metal’s strongest year since 1979.