Silver has plunged 20 percent in recent days, in part due to the sharp increase in the amount of money investors are required to put down to buy the metal.
The whole commodity sector, in fact, is going through a major pullback this week as worries about a slowdown in the global economy are prompting investors to scale back on risky trades.
But while the selloff in silver, at least, is being linked partly to higher margins, oil prices move on more fundamental reasons such as supply and demand. Oil was lower on Wednesday, for instance, because of
a bigger-than-expected increase in US crude supplies.
As silver speculation rampaged and drove prices of the white metal to near $50 an ounce, exchanges took stern measures to rein in the trade. The COMEX on Wednesday
raised its margin requirements for
the third day in a row-from $14,513 to $16,200 for initial margin and $10,750 to $12,000 for maintenance margin-which represents
nearly a tripling in the cost since February.
The higher margin rules, as well as an unwinding in positions within high-volume exchange-traded funds, has driven silver to lows it hasnt seen since April. -CNBC