Silver Stabilizes After Biggest Drop in Five Years
Silver prices stabilized on Tuesday after suffering their biggest drop in more than five years in the previous session. Silver managed to hold above $72 an ounce, after plunging 9% on Monday, while gold prices were little changed after suffering their biggest drop in two months. The decline in the precious metal occurred as technical indicators suggested that price increases had been too rapid, coupled with thin market liquidity that exacerbated price fluctuations.
Several exchanges moved to increase margins on Comex silver futures contracts starting Monday, as a measure to control risk. When margins are increased, traders must provide more funds to maintain their positions. This move forced some speculators to close or reduce their positions, further exacerbating the price decline.
Despite the correction, both gold and silver are still on track for their best annual performance since 1979. This price increase was driven by high central bank buying, inflows into exchange-traded funds (ETFs), and interest rate cuts by the Federal Reserve. Lower borrowing costs are a boost for commodities, including non-yielding precious metals.
The significant increase in silver prices also occurred after the London market experienced a massive supply shortage two months ago, fueled by ETF inflows and exports to India. Despite the large inflow into London warehouses, most of the world's silver supply remains in New York, with traders awaiting the outcome of a US investigation that could lead to tariffs or other trade restrictions.
In recent days, speculative interest from China has also been a major driver of silver prices. Heavy buying on the Shanghai Gold Exchange for December silver contracts pushed premiums to their highest levels ever recorded. However, some investors have become more cautious after unheeded risk warnings led China's silver fund to suspend new customer registrations. (asd)
Source: Newsmaker.id
