BLBG: Silver Has Biggest Two-Day Drop Since 2008 on Margin Increase; Gold Falls
Silver futures tumbled, capping the biggest two-day slide since October 2008, after margin requirements on the Comex increased for the second time in less than a week. Gold fell the most since mid-March.
The minimum amount of cash that must be deposited when borrowing from brokers to trade silver futures will rise to $16,200 per contract at the close of business today from $14,513, CME Group Ltd., Comex’s owner, said yesterday. A year ago, the margin was $4,250. The metal, which tumbled 12 percent in two days, has doubled in the past 12 months.
“Margin-requirement hikes usually translate into people liquidating positions,” said Bernard Sin, the head of currency and metal trading at MKS Finance SA in Geneva. “The exchange is trying to calm the market down. It’s been overheating.”
Silver futures for July delivery fell $3.499, or 7.6 percent, to settle at $42.585 an ounce at 2:07 p.m. on the Comex in New York, the biggest drop for a most-active contract since Dec. 1, 2008. The price dropped 5.2 percent yesterday. The two- day slump was the largest since Oct. 16, 2008.
The Comex margin went up 13 percent at the close of business on April 29. In April, the price gained 28 percent, the most since January 1983.
“You’ve got another margin raise, and a lot of people are trading with a hope and a prayer,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago.
After rising to a record $50.35 in January 1980, the metal dropped 78 percent in four months. This year, silver has climbed 38 percent, the most among 24 raw materials in the Standard & Poor’s GSCI Index. The price reached $49.845 on April 25.
Gold Record
Gold futures for June delivery fell $16.70, or 1.1 percent, to $1,540.40 an ounce, the biggest decline for a most-active contract since March 15. Yesterday, the metal rose to a record $1,577.40. The price has gained 30 percent in the past year.
“Between gold and silver, silver has the bigger downside risk, since it’s been outperforming gold since August,” said Tom Pawlicki, an analyst at MF Global Holdings Ltd. in Chicago.
Palladium futures for June delivery fell $1.70, or 0.2 percent, to $782.40 ounce on the New York Mercantile Exchange.
Platinum futures for July delivery declined $15.20, or 0.8 percent, to $1,860.50 an ounce.
To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
