Gold and Silver Continue Their Sharp Decline: Shock Effect in the Markets

Introduction

Recently, the fluctuations in the precious metals market have reached noteworthy dimensions. Gold and silver continue their sharp declines initiated by the optimism surrounding U.S. President Donald Trump promoting Kevin Warsh for the new Fed presidency.

CME's Margin Increases

In particular, CME has created a panic among investors by deciding to increase margin rates for precious metals. The margin rate for gold futures contracts on COMEX has been raised from 6% to 8%, while the margin requirement for 5,000-ounce silver contracts has been increased from 11% to 15%. Additionally, similar margin increases have been observed in the futures of platinum and palladium.

Effects of Margin Increases

With these regulations from CME, the increases in margin rates may lead to a serious liquidity squeeze in the markets before the closing of the sessions. The necessity for investors to have higher capital may pressure speculative positions and result in the closure of existing trades.

Current Market Situation

According to analyses, the nomination of Warsh is cited as the precursor of the decline, while forced liquidations and margin increases are also stated to accelerate sales. Earlier today, gold fell to as low as $4,564.78, and currently trades at $4,608.54, with a loss of more than 5%. On the other hand, silver, after testing $75.61 at the beginning of the week, is currently at $75.78, showing a decline of 7.4%.

Conclusion

The ups and downs in precious metals, combined with uncertainty in the markets and increasing margin rates, may put more pressure on investors in the coming days. Experts emphasize that the long-term effects of this situation should be carefully monitored.