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Comex Silver Slides On Another Round Of Long Liquidation; Gold Also Eases

(Kitco News) - Silver futures fell to their lowest level in more than two weeks Tuesday afternoon as traders continued to exit bullish positions in response to margin hikes and the inability of silver to maintain last week's upward momentum.

Gold is also weaker.

In electronic screen trading after the Comex pit close, at 1:42 p.m. EDT, July silver was $4.279, or 9.3%, lower at $41.805 per ounce on the Comex division of the New York Mercantile Exchange. It bottomed at $41.77, its lowest level since April 15.

"Really, I think it's long liquidation," said Afshin Nabavi, head of trading at MKS Finance.

Some of this was prompted by three margins hikes on silver futures since the start of last week by CME Group, the most recent of which goes into effect after Tuesday's close. The exchange said this was meant to "ensure adequate collateral coverage" but means traders must ante up more money to meet margin calls, prompting some to leave the market instead.

The margin rises are creating some "discomfort" among silver traders, said Sterling Smith, commodity trading adviser and analyst with Country Hedging. Further, a research note from optionsXpress pointed out that some of the larger futures commission merchants have raised their requirements above exchange minimums due to the "extremely high price" of the metal and increased daily fluctuations.

"The violence of the trade over the last two or three days is naturally pressuring people to a great extent to where you're basically chasing the longs out of the market," Smith said.

Nabavi said there seems to be some "disappointment" among traders that silver has not been able to get back above the $49.80-an-ounce area touched early last week. "It looks every time we have a rally, it's being sold," he said.

Smith put the next chart support around $40.50 to $40 but questions how strong this will be. A more solid level may lie around the $36 region, where some short covering and new buying might emerge, he said.

Meanwhile, June gold was $19.90 lower at $1,537.20 an ounce, dragged down in large part by the weakness in silver, Smith suggested.

"Silver's massive headache has given gold a cold and is causing some weakness there," Smith said. "Also, there is some minor firmness in the dollar."

By Allen Sykora of Kitco News; asykora@kitco.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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