Silver prices fluctuate 33% in one week! Is the CME's seventh margin adjustment a sign of a top?

Silver prices V-shaped reversal on Friday.

On February 5th, local time, the Chicago Mercantile Exchange (hereinafter referred to as “CME”) announced that the initial margin requirement for its COMEX 5000 silver futures would be increased from 15% to 18%. This is the seventh adjustment since December last year. The move caused spot silver prices to plunge by as much as 10% on Friday, then surged nearly 20% from the daily low, closing up 9.7%.

At the beginning of this year, silver prices hit a historic high, reaching a record $121 per ounce on January 29. After that, on January 30, prices plummeted by 26% in one day, with a weekly decline of 17.5%, and a weekly range of 45.84%. Since then, silver prices have struggled to stabilize, fluctuating multiple times this week, with a weekly range of 33.03%, ultimately falling 8.77% for the week to $77.78 per ounce. As a result, the year-to-date increase in spot silver has narrowed to 8.67%.

Meanwhile, spot gold rebounded strongly from a low of around $4,400 per ounce after a sharp sell-off on Monday, with the year-to-date gain rising to 15.01%. As of the close on February 6, it closed at $4,966.61 per ounce, up 15.01% since the start of the year.

After continuous massive shocks in gold and silver prices, has a historic market top been formed?

CME’s Seven Margin Hikes

Some market opinions suggest that historically, silver peaks have been accompanied by the exchange repeatedly raising margin requirements and other key indicators. In this round of silver market, CME’s frequent adjustments to margin requirements are particularly rare.

Since December 12, 2025, CME has adjusted the margin requirements for silver futures seven times within just two months: on December 12, 2025, initial margin increased from $22,000 to $24,200; on December 29, it increased to $25,000; on December 31, a significant increase of 30%, up to $32,500; on January 12, 2026, the mechanism shifted from a fixed amount to a 9% ratio; on January 28, it increased to 11%; on January 31, to 15%; and the latest on February 5, to 18%.

Behind these adjustments is the extreme volatility in the silver market.

Market data shows that within seven trading days, silver experienced 11 instances of price swings exceeding 5%, with monthly volatility surpassing 100%.

On Thursday, February 5, spot silver plunged 19%, wiping out all gains for the year. On Friday morning in Asia, due to liquidity shortages, the market struggled to find a bottom, with silver prices dropping to nearly $64 per ounce, almost halving the historic high of $121.65 per ounce set seven days earlier.

However, a rapid rebound followed the sharp decline. By the close on February 6, spot silver recovered to $77.78 per ounce, up 9.7%. Meanwhile, spot gold rebounded strongly from a low of around $4,400 per ounce after Monday’s sell-off, with the year-to-date increase rising to 15.01%. As of the close on February 6, it was at $4,966.61 per ounce, up 15.01% since the start of the year.

Jiang Yuting, head of the Snowball Financial Products and Research Department, pointed out that when silver prices broke above $120, the precious metals market was almost devoid of naked shorts, and market sentiment was extremely euphoric, with speculation reaching a peak. As the exchange repeatedly raised margins and limited open positions, speculative positions took profits, and the nomination of Kevin W. Warsh by Trump on January 30 to chair the Federal Reserve, advocating balance sheet reduction and a stronger dollar, intensified tightening expectations. The dollar strengthened, sentiment reversed, forced liquidations occurred, and a cascade of selling ensued, exacerbating the decline.

Ole Hansen, Head of Commodity Strategy at Saxo Bank, said that when volatility rises, market makers naturally widen spreads and reduce balance sheet usage, leading to liquidity becoming more fragile when most needed. Before market order restoration, “volatility may form a self-reinforcing cycle.”

Long-term Outlook for Silver Remains Optimistic

Despite short-term wild price swings, the structural contradictions in the spot silver market remain unresolved.

From supply and demand fundamentals, UBS expects a nearly 300 million ounce supply gap in 2026, with investment demand exceeding 400 million ounces. UBS strategists note that the recent plunge in silver prices is more driven by risk aversion than a collapse in fundamentals, but extreme volatility poses risks to short-term positions.

Nicky Shiels, Research Director at MKS PAMP, said that given silver’s huge volatility, it has indeed been labeled a “meme commodity.” Although silver is not cheap in absolute terms, expanding retail channels have amplified speculative inflows. She expects silver to digest its previous overbought levels in the coming weeks rather than rebound immediately, and prices could even dip to $60 per ounce.

Vasu Menon, Managing Director and Chief Investment Strategist at OCBC Bank, believes that although recent market sentiment has been severely impacted, for investors who can withstand volatility, the structural investment logic of silver remains intact. He pointed out that silver’s hybrid nature often makes it vulnerable during risk-averse periods.

“Silver can be seen as a hybrid asset, combining features of precious metals, industrial metals, and speculation,” Menon said. “It may look like a meme asset, especially with retail inflows, but remember, it still has fundamental drivers.” Menon set a long-term target price of $134 per ounce for March 2027.

UBS believes that the long-term fundamentals for silver remain solid. “Lower nominal and real interest rates, global debt concerns, dollar depreciation, and our expectations for a global economic recovery in 2026 should support higher silver prices.” The bank stated that without sustained investment demand, it would be difficult for silver to stay above $85 per ounce. In times of high volatility, UBS suggests that betting on silver remaining around $65 per ounce appears more attractive in the near term.

CICC analyst Bai Suona pointed out that recent US employment data have generally been weak, US-Iran negotiations still carry uncertainties, and the tight supply of spot silver remains unchanged. The most panic-driven selling phase in precious metals may have passed.

Gold Needs Caution in the Short Term

Gold has also experienced a strong rebound after sharp volatility. Over the past few days, gold rebounded strongly from a low of around $4,400 per ounce after Monday’s sell-off, with the year-to-date gain rising to about 14%. As of the close on February 6, it was at $4,966.61 per ounce, up 3.98%.

However, Fawad Razaqzada, senior analyst at Gain Capital, remains cautious about the nature of this rebound. He believes that the short-term outlook for gold is still uncertain. The biggest concern now is whether this calm period is just a prelude to the next downtrend. Undeniably, the rebound is strong; after such a brutal sell-off, some form of retracement is inevitable. But it’s premature to call this a solid bottom. It still looks like a counter-trend rebound rather than the start of a new bullish phase. The recent massive decline has almost certainly changed market sentiment, and once markets undergo such a reset, they rarely recover in a straight line. Another round of selling in the short term is not surprising, and the outlook for short-term bearishness remains.

From a technical perspective, Razaqzada pointed out that breaking below the psychological level of $5,000 is significant—not only because of the round number but also due to the speed and magnitude of the decline. Currently, spot gold seems to be trading within a short-term ascending wedge pattern—typically a bearish continuation signal rather than a bullish one. On the upside, resistance is near $5,000, with further selling pressure at $5,100. These levels now appear to be areas where sellers are active during rebounds. On the downside, confirmation of a break below the lower trendline of the wedge could lead to another rapid decline. Support levels are around $4,900 and $4,800, but the key level remains at $4,500.

From a macro fundamental perspective, Razaqzada believes that some of the factors that drove gold higher earlier this year are beginning to lose momentum. Most bullish narratives revolve around US monetary policy uncertainty and expectations of significant rate cuts. After Trump’s nomination of Kevin W. Warsh as the next Fed chair, the tone shifted—markets interpreted this as relatively hawkish, which directly led to a strong rebound in the dollar. A stronger dollar usually acts as a headwind for precious metals. If this rebound is not just a short-term correction, it will continue to pressure gold prices.

However, many still remain optimistic about gold.

Michael Hsueh, Gold and Precious Metals Analyst at Deutsche Bank, reiterated in a recent report that he maintains a long-term target of $6,000 per ounce. Hsueh believes that the thematic drivers supporting gold remain solid, and the fundamental logic for investors to allocate gold and other precious metals has not wavered. Major institutional investors have signaled plans to gradually diversify their portfolios over the coming years to reduce dependence on dollar-denominated assets, and there is no sign of this trend changing.

Looking ahead, Bai Suona also told Pengpai News that market sentiment before the Spring Festival was cautious, and precious metal prices are expected to gradually enter a range-bound consolidation. However, the medium- to long-term logic remains unchanged. Over the medium to long term, the bullish case for precious metals remains strong. With the Fed still considering rate cuts this year, ongoing geopolitical uncertainties, and the US debt burden fueling de-dollarization trends, central banks, institutions, and retail investors are likely to continue increasing their allocations. The price center of precious metals still has room to rise, and after stabilization, there will be good medium- to long-term investment opportunities.

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(Article source: The Paper)