The wild ride for precious metals investors took a sharp turn this week. After both gold and silver hit historic highs—gold peaking at $5,600 per ounce and silver touching $121.64 on Thursday—the market suffered a staggering reversal. By Friday, gold had crashed below $4,500 per ounce in overnight trading, marking its biggest one-day drop since 2013, while silver plummeted more than 31% in a single session.
Margin Hikes and Market Volatility
The fallout prompted the CME Group to step in over the weekend. Effective after Monday’s close, margin requirements on COMEX gold futures were raised from 6% to 8%, and on 5,000-ounce silver contracts from 11% to a hefty 15%. These moves, aimed at curbing excessive speculation, force traders to put up more collateral when betting on price swings. The exchange’s decision follows a steep sell-off last week, which left over-leveraged traders scrambling to cover losses.
The dramatic price swings have been fueled by a cocktail of profit-taking, a stronger US dollar, and fresh geopolitical headlines out of Washington. The dollar index has strengthened 0.8% since Thursday, making dollar-priced gold less attractive for overseas buyers. Meanwhile, lingering inflation above the Federal Reserve’s 2% target—and uncertainty over President Trump’s likely pick of Kevin Warsh for Fed chair—has left markets guessing about future interest rates. Higher rates typically sap demand for gold, which doesn’t pay interest.
From Frenzy to Correction
The “air-pocket” drop in gold, as Forbes put it, came after “an extraordinary run” where call option buying forced sellers to hedge, driving prices even higher in a feedback loop. But as prices reversed, many investors were forced to sell, accelerating the slide. On Wall Street, opinions are split on whether this is the start of a broader correction or just a temporary setback.
Still, gold and silver remain far above last year’s levels—gold’s spot price in New York was less than $2,800 per troy ounce a year ago. As of early Tuesday, gold had partially recovered, up over 6% from Monday’s lows, while silver bounced more than 12%. But with heightened volatility, rising margin requirements, and policy uncertainty, the mood in the precious metals market is anything but calm.
