Khaberni - Gold and silver prices continued to decline on Monday as increased margin requirements by the Chicago Mercantile Exchange (CME) group exacerbated sharp sell-offs that the markets witnessed last week after Kevin Warsh was nominated as the chairman of the Federal Reserve (the U.S. central bank).
Gold plummeted 3% in spot transactions to $4,718.35 per ounce after dropping nearly 10% earlier in the session.
American futures contracts for gold for April delivery stabilized at $4,740.90 per ounce.
Gold fell 9.8% on Friday and has dropped by about $900 from its peak on January 29 at $5,594.82, erasing most of this year’s gains.
John Mayer, an analyst at SP Angel said, "Gold and silver are highly volatile, and when the price peaks, it starts to fall."
Silver dropped 3.3% in spot transactions to $81.75 per ounce after falling 15% earlier in the session. Silver has fallen about 32% since recording its all-time high at $121.64 last week.
Despite the sharp decline, analysts warned of interpreting this movement as the start of a long-term drop.
Michael Hsu, a precious metals analyst at Deutsche Bank said, "The conditions do not seem ripe for a sustained reversal in gold prices," pointing to continued volatility and not a collapse in sentiments.
The CME group said on Friday that it would increase margin requirements on precious metals futures contracts, with the changes taking effect after the market closes today, Monday.
In the meantime, the dollar index continued its gains, making dollar-priced precious metals more expensive for foreign buyers.
Platinum fell 1.4% in spot transactions to $2,132.55 per ounce, while the price of palladium dropped 2.7% to $1,743.93.
