Silver (XAGUSD) is down by nearly 16% on Thursday, bringing its weekly loss to 36% as the precious metal struggles to find support.
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Speculative activity has helped drive silver higher in recent months, and just as much can be said for its decline. As prices fall, leveraged metals traders are susceptible to margin calls and liquidations. “Excessive and exuberant Chinese speculation, in my view, is wreaking havoc on the price discovery process for bullion,” said Metals Daily CEO Ross Norman.
Rising Margins, Fed Chair Nominee Pressure Silver
Furthermore, several global metal exchanges have raised margin requirements in recent weeks. This reduces available leverage and makes it more expensive for traders to maintain large positions. It can also force some traders to exit their existing positions to meet the higher margin needs.
Elsewhere, both silver and gold (XAUUSD) have reacted to President Trump’s nomination of Kevin Warsh to replace Fed Chair Powell. Warsh is viewed as a policy hawk who favors higher rates in order to keep inflation at bay. However, precious metals benefit from lower rates, as the opportunity cost of holding them relative to interest-bearing assets decreases.