Stay updated with free updates
just sign up objects myFT Digest – delivered straight to your inbox.
Silver prices fell on Monday, leading gold and other precious metals as their record-breaking rally suddenly reversed.
Spot silver prices fell nearly 9% to just above $72 a troy ounce by afternoon trading, on track for their biggest one-day decline since the Covid pandemic, but reversed gains made during the thinly traded Boxing Day session.
The fall also hit gold, which slipped more than 4 percent to just above $4,300 a troy ounce, falling below record highs it had hit in recent sessions.
Traders said the move reflected both profit-taking after a strong run and a response to a notice issued by CME on Dec. 26 indicating that margin requirements for a range of metals futures contracts, including silver and gold, were set to increase after Dec. 29.
Rushabh Amin, multi-asset portfolio manager at Allspring Global Investments, said the combination of higher margin requirements, lower liquidity and other factors “is working against not only silver, but other precious metals as well.”
“This is not a shock in itself, but a very strong consolidation,” he said, referring to the market term for a huge decline that comes after a speculative boom.
The selloff followed a record rally in the metal, as investors turned to safe-haven assets as a haven against geopolitical tensions and concerns over the devaluation of traditional currencies like the US dollar. Spot prices surpassed $80 a troy ounce for the first time in early trading on Monday, up from $50 as recently as November.
Analysts have seen signs of a speculative bubble in precious metals, as investors flock to asset classes with limited levels of supply. Metals have also been boosted by US interest rate cuts, which have reduced the relative attractiveness of dollar assets.
Ole Hansen, head of commodity strategy at Saxo Bank, said the silver rally has gone “parabolic,” leaving the market vulnerable as margin requirements are rising, but remain low by historical standards.
In a sign of increased attention to the silver boom, Elon Musk written on x On 26 December the higher prices were “not good”, citing the metal’s widespread industrial use.
In a December 29 note, UBS said the surge in gold was partly due to “seasonal liquidity” and demand for real assets, warning that prices were trading at a “high premium” after the metal’s strongest year since 1979.
