Gold Silver Prices: The prices of gold and silver have reversed course much to the disappointment of traders and investors worldwide.
The yellow metal and silver saw a steep decline as investors start piling into safe haven assets in the wake of geopolitical tensions, Greenland ambitions of Donald Trump, stubborn inflation in major world economies and the role of Iran in regional conflicts.
Gold Silver Prices-Federal Reserve Chair Nomination
Donald Trump nominated Kevin Warsh as the next Chairman of the US Federal Reserve. The nomination of Warsh is seen by the markets and investors as a great sign as someone with economic crisis-era experience would be replacing Jerome Powell.
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The nomination of Warsh is seen by the markets as an excellent choice. Warsh has been the most hawkish on inflation.
Raised Margin Requirements
The Chicago Mercantile Exchange recently raised margin requirements on silver and gold futures. CME raised gold margins from 6 to 8 percent for standard risk and from 6.6 to 8.8 percent for heightened risk. It increased silver margins from 11 to 15 percent and from 12.1 to 16.5 percent.
The increase in margins would raise trading costs that would force leveraged traders (often longs or shorts) to liquidate their positions. This would amplify selling and depress the prices of futures that have an influencing impact on spot markets. Additionally, the margin hikes can prolong volatility and reduce speculative participation.
The Future Ahead
Despite the recent sharp falls seen in the prices of gold and silver, gold is till up by approximately 65 percent while silver is up by more than 120 percent.
Analysts at Deutsche Bank said they are still highly hopeful that the yellow metal would hit $6,000 this year. Jateen Trivedi, VP Research Analyst, Commodity and Currency, LKP Securities remarked the yellow metal is expected to stay volatile for a while. Trivedi commented that gold is still likely to be relatively more stable when compared to silver that is likely to notice exaggerated swings.
Manoj Kumar Jain of Prithvi Finmart, remarked that both silver and gold are presently noticing widespread patterns of extreme price swings. Jain remarked that the ongoing geopolitical developments and dollar index movements are likely to cause volatility in both silver and gold.
