CME raised margin requirements on precious-metal futures for the second time in one week after violent price swings ripped through gold and silver trading.
The decision came after sharp rallies flipped into fast selloffs, forcing traders to manage far larger daily risk. The higher collateral applies to futures tied to gold, silver, platinum, and palladium, and takes effect after markets close on Wednesday.
The move lands as precious metals face extreme year-end volatility. Silver stands out. Prices blew past levels that few traders expected to see this year.
The swings were not small. They were fast, deep, and expensive. CME adjusted margins as traders piled into positions while prices jumped and then collapsed within hours.
Clearinghouses require brokers to post daily cash margins to cover possible losses from client trades. CME calculates those levels using market volatility. As price ranges widen, required collateral rises.
Since late September, margin levels for silver have increased more than six times as intraday moves kept stretching wider. Earlier this week, the exchange also raised margin requirements for copper as volatility spread beyond precious metals.
Silver speculation explodes as futures suffer historic intraday reversals
Speculative interest in silver surged across major markets. Activity jumped on China’s main spot precious-metals exchange and across U.S. trading venues. The spot price of silver climbed to a record above $84 an ounce early Monday.
Hours later, it fell close to $70, marking one of the largest same-day reversals ever seen in the metal.
Comex silver futures carry a contract size of 5,000 ounces. That structure turned recent price swings into massive dollar moves.
A single contract saw nearly $20,000 shift hands during the sharp reversal, according to Phil Streible, chief market strategist at Blue Line Futures. After introducing Phil, he said the size of the move left CME with no choice but to raise margin levels again.
Alongside the main contract, the exchange also offers a micro silver futures product sized at 1,000 ounces. Trading in that smaller contract exploded late in the year. Volume jumped 127% in December after remaining quiet from January through November, as traders sought lower exposure during extreme volatility.
Some market participants said the margin changes added pressure to prices this week. Higher collateral needs forced some bullish traders to cut positions. Several analysts had already warned that silver looked stretched after its rapid climb.
Silver sold off hard on Wednesday. Futures dropped as much as 9.9%, sliding toward $70 an ounce. Platinum and palladium contracts also logged steep intraday losses. Gold moved lower as well, though declines there were more restrained.
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