NEW YORK (TheStreet ) -- Silver prices were falling after another margin hike from the CME and gold prices were following suit.
Gold for June delivery was down $8.70 to $1,506.60 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded in a tight range between $1,522.10 and $1,505.80. The spot gold price was down almost $17, according to Kitco's gold index.
Silver prices were falling $1.35 to $38.03 an ounce and were headed toward the $37.87 area, which was the last settlement level in March before April's 31% rally.
The CME announced it would raise the amount of money it takes to buy a 5,000-ounce silver contract by another 33%. As of May 9, the initial speculative margin will rise to $21,600 making it the fourth raise in two weeks.
Clearing houses and exchanges reportedly hike margins to make sure traders actually have the cash to back up their positions, which supposedly protects against volatility. The idea is that it shakes out the "hot" money, or froth, or big leveraged bets, from the market.
The problem is that silver's selloff has been fast and furious and has taken gold with it. The SPDR Gold Shares(GLD_) dropped almost 5 tons on Wednesday while the iShares Silver Trust(IAU_) shed 521.8 tons bringing the total to 626.49 for May.
But not all exchange-traded funds are seeing this kind of mass selling. Tim Harvey, senior vice president at ETF Securities, said he hasn't seen any major redemptions from its gold and silver physically backed ETFs in the U.S. ETFS Physical Gold(SGOL_) and ETFS Physical Silver(SIVR_).
"I think it says that the people using us at the moment are the asset allocators and the investors ... if you're a day trader I think you've been finding your access to silver through futures or other means but if you've been an investor in silver for the medium and long term, you've been with us," Harvey said.
Harvey thinks the recent selloff doesn't represent a fundamental shift in the precious metal's market. Inflation is still rising worldwide with the U.K.'s reading at 4%, EU at 2.7%, U.S. at 2.1%, China at 5.4% and India at almost 9%.
