Silver experienced significant turbulence this week, culminating in a dramatic Friday rally that failed to erase substantial losses. The spot price jumped 8.6% to $77.33 per ounce late in the session, recovering from a drop below $65 earlier. Despite this surge, the metal closed the week down more than 8.7%.
Exchange Tightens Trading Conditions
The CME Group announced increased margin requirements for COMEX silver futures, elevating them to 18% from 15%, effective after February 6. For gold futures, margins rose to 9% from 8%. Higher margin demands force traders to commit more capital to maintain positions, potentially cooling speculative activity during periods of heightened volatility.
Analysts note the move comes amid extreme price swings. "We're witnessing substantial speculative long positioning in silver," remarked Jim Wyckoff, senior analyst at Kitco Metals. The adjustment risks triggering forced liquidations if prices retreat, as traders scramble to meet new collateral requirements.
Pressure in Chinese Market
In China, the UBS SDIC Silver Futures Fund hit its 10% daily decline limit for a fifth consecutive session. The fund's manager warned investors of potential "severe losses," particularly if purchasing units at high premiums. Consultant Duan Shihua described a "perfect storm" driven by the fund's structure and a surge in retail trading, highlighting how silver-linked products can diverge from the underlying metal's price.
"Risk appetite appears to be fading," observed Ilya Spivak, head of global macro at Tastylive, pointing to broader pressure on risk-sensitive assets. ANZ's Soni Kumari suggested the pullback arrived opportunely before Chinese New Year but cautioned that volatility may persist as less resilient investors exit.
Economic Data Looms
Market participants are now turning their attention to key U.S. economic indicators scheduled for release next week. The Labor Department's January employment report arrives on February 11, followed by January Consumer Price Index data two days later. Unexpected results in either report could reshape interest rate expectations, influencing the U.S. dollar and real yields—critical drivers for silver prices.
While silver serves as both a precious metal and an industrial commodity, its dual nature leaves it exposed to shifts in economic growth sentiment and broader market risk aversion. The recent margin increase, while intended to manage volatility, introduces fresh uncertainty into a market already navigating sharp price movements and concentrated retail flows.