Precious metals face a year-end plunge, risk warning behind CME's third increase in margin requirements

On December 31, the international precious metals markets collectively declined, with volatility exceeding expectations. As of the time of publication, gold prices fell by 1.18% to $4,287 per ounce, while silver experienced an even more significant drop, down 7.02% to $70.86 per ounce. Additionally, platinum plummeted 12% to $1,918 per ounce, and palladium also declined 6% to $1,501 per ounce.

Behind the broad weakness in precious metals, the series of actions by CME Group warrants attention. The exchange announced that after the close on December 31, it would simultaneously raise margin requirements for gold, silver, platinum, and palladium contracts. This is the third time CME has increased margin thresholds within a month, with the logic of weakening leverage to force traders to increase capital投入 or be forced to liquidate positions, thereby cooling market speculation enthusiasm.

Leverage Liquidation and the Repetition of Historical Concerns

The rapid decline in silver easily evokes memories of two past market-shaking events.

In 1980, the Hunt brothers attempted to push silver prices higher through futures leverage, successfully driving silver to a historic high. However, CME subsequently issued new regulations imposing strict limits on margin purchases for silver futures. The Hunt brothers were forced to liquidate their positions, ultimately filing for bankruptcy. This event became a classic case of a “short squeeze reversal.”

A more recent example occurred in 2011. During that year, loose monetary policy combined with speculative capital drove silver prices up. CME increased margin requirements for silver five times in just nine days, resulting in silver prices dropping nearly 30% over the following weeks, leaving a deep market trauma.

Current Situation and Market Outlook

Although silver has experienced a sharp correction, market analysts point out that the fundamental support has not completely disappeared. The best strategy for investors is to patiently wait for the speculative bubble to fully deflate, observe the pace of liquidity returning after the New Year, and consider entering on dips when conditions are ripe. This approach can both avoid short-term risks and seize medium-term opportunities.