After the collapse, quickly out again! CME raises precious metals futures margin for the second time in a week.

After the futures prices of gold and silver experienced the largest drop in decades, the Chicago Mercantile Exchange (CME.US) announced an increase in the trading margins of its New York Commodity Exchange (COMEX) related contracts. CME Group Inc. Class A issued a statement on Friday stating that for non-high-risk accounts, the margin ratio for gold futures will be increased from the current 6% to 8% of the contract's underlying value; while for high-risk accounts, the margin ratio will be increased from 6.6% to 8.8%. The statement also indicated that the margin ratio for silver futures for non-high-risk accounts will be increased from 11% to 15%, and for high-risk accounts, the margin ratio will be increased from 12.1% to 16.5%. In addition, the margin ratios for platinum and palladium futures will also be increased simultaneously. This margin adjustment will officially take effect after the market closes on Monday, as stated by CME Group Inc. Class A, in order to ensure that the margins adequately cover trading risks after conducting a routine assessment of market volatility. It is understood that the precious metals market experienced one of the most severe single-day adjustments in decades on Friday. After gold and silver prices soared to historic highs earlier this month, there was massive profit-taking in the market. International gold prices fell by over 11% in a single day, while COMEX silver prices plummeted by more than 31%. Regarding the reasons for the sharp drop in precious metal prices, Enrich Money CEO Ponmudi R analyzed, "The main trigger was the nomination of Kevin Warsh by U.S. President Trump as the next Federal Reserve Chairman. Warsh is known for his hawkish stance on inflation and emphasis on the independence of the Federal Reserve, leading to a rapid macro repricing in the market: strengthening of the US dollar, rise in real yields, and rapid liquidation of leveraged positions in gold and silver, which were previously used as overhedging tools. This led to intense selling in the market, with billions of dollars in market value evaporating, clearing out weak long positions in the typical frenzy turning exhaustion phase. However, this does not mean the beginning of a structural bear market reversal." The increase in margin ratios means that investors trading gold, silver, platinum, and palladium futures will need to deposit more margin as collateral. Although CME Group Inc. Class A typically raises margins during periods of extreme volatility in futures contract prices, the adjustment on Friday may further force small and medium investors with insufficient funds to meet margin calls to exit the market. SEBI-registered commodity expert Anuj Gupta stated, "Following the increase in copper trading margins, CME has now raised the margin requirements for gold and silver. This move is expected to continue putting pressure on precious metal prices." It is worth noting that earlier this week, CME Group Inc. Class A had already raised the margin ratios for silver, platinum, and palladium futures due to the sharp rise in precious metal prices.