Gold and silver futures headed sharply lower Tuesday, with the tumble in prices for gold’s sister metal coming as the CME Group raised margin deposit requirements for trades following precipitous gains in the precious and industrial metal.
Silver futures for March delivery were trading $1.96, or 6.7%, lower to $27.45 an ounce, after jumping 9.3% to mark around the highest settlement for a most-active contract since around 2013.
The slump in silver follows what some dealers and commodity strategists have attributed to an attempted short-squeeze, pointing to individual investors who also were blamed for driving up the values in shares of GameStop Corp and AMC Entertainment Holdings in the past few weeks.
On Monday, the Commodity Futures Trading Commission’s Acting Chairman Rostin Behnam said that the CFTC is “closely monitoring recent activity in the silver markets.”
That statement was followed by the CME Group announcing that it was raising margin requirements to $16,500 per contract from $14,000, an 18% hike, effective Feb. 2.
“It appears the attempted short-squeeze in the silver market has failed, at least at this point,” said Jim Wyckoff, senior analyst at Kitco.com.
“Silver bulls’ next upside price objective is closing prices above solid technical resistance at this week’s high of $30.35 an ounce,” the Kitco analysts wrote. “The next downside price objective for the bears is closing prices below solid support at $26,” he said.
Prices for silver have rallied in recent days and comes as a post on Reddit last week referenced a short squeeze on the metal in a way similar to those that helped to send the prices of GameStop and AMC surging and hobbled a number of hedge funds.
However, the $1.5 trillion silver market is viewed as a much tougher target for individual investors congregating on sites like WallStreetBets and Discord.
Meanwhile, gold prices were getting knocked sharply lower.
April gold tumbled $30.40, or 1.6%, to trade at $1,833.50 an ounce, following a 0.7% gain to start the week. Gold prices are trading below both the 50-day moving average at $1,858.26 and the 200-day MA at $1,852.81 an ounce, FactSet data show.
Moving averages are used by technical analysts to help gauge short-term and long-term bullish and bearish trends in an asset.