Volatile gold, silver prices prompt CME to set tougher margins for traders

Margin requirements are larger for silver than for gold because of its notoriously volatile price

CME Group Inc. hiked margin requirements for gold and silver futures a day after their sharpest selloff in five months.

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Increasing volatility means investors could experience larger fluctuations in the size of their accounts, and higher margin requirements help the exchange's clearinghouse ensure trade obligations are met.

TickerSecurityLastChangeChange %
GLDSPDR GOLD SHARES TRUST - EUR ACC176.70+1.76+1.01%
SLVISHARES SILVER TRUST22.02+0.72+3.38%

Gold speculators must pay an initial margin requirement of $10,230 to open a position in a contract and $9,300 to retain that position, up from $9,570 and $8,700, respectively. Hedgers and members are required to meet initial margin and maintenance margin requirements of $9,300, up from $8,700.

Meanwhile, silver speculators must pay an initial margin requirement of $14,575 and a maintenance margin of $13,250. Hedgers and members must pay initial and maintenance margins of $13,250.

Margin requirements are larger for silver than for gold because of the notoriously volatile nature of its price due to lower liquidity and its supply and demand dynamics.

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Front-month Comex gold futures plunged $91.80, or 4.91%, to $1,932.60 an ounce on Tuesday, while front-month Comex silver futures sank $3.212, or 11%, to $26.037 an ounce. Both drops were the largest on a percentage basis since mid-March.