Silver prices stabilize after the largest daily decline in over 5 years

SadaNews - Silver prices have recovered some of their losses after experiencing the largest daily drop in over five years, as the white metal continues its trend toward achieving a monthly increase of about a third, supported by a continued supply shortage.

The white metal rose to nearly $75 an ounce on Tuesday, after declining by 9% in the previous session, while gold also gained after recording its largest drop in two months.

Traders took profits after technical indicators showed that the rises were too rapid, while weak market liquidity exacerbated the recent price volatility.

Some exchanges moved to curb risks, with margin requirements on certain silver futures contracts at the "Comex Exchange" being raised starting Monday.

When exchanges raise margin requirements, traders must deposit additional funds to keep their positions open. Some speculators lack the additional liquidity, forcing them to reduce or close their positions.

Precious metals are on track for their best annual performance since 1979

Despite this decline, both silver and gold are still on track to record their best annual performance since 1979.

The metals have been supported by increased purchases from central banks, inflows into exchange-traded funds, and three consecutive rate cuts from the U.S. Federal Reserve. Low borrowing costs are a supportive factor for non-yielding commodities.

The latest wave of rising silver prices came just two months after the London market faced extreme pressure, as inflows into exchange-traded funds and exports to India drained stocks that were already at critical levels.

Since then, London's vaults have seen significant inflows, but a large portion of globally available silver remains in New York, awaiting the results of an American investigation that may lead to tariffs or other trade restrictions.

The Indian brokerage firm "Motilal Oswal Financial Services" stated that this year's surge in silver is "driven by a real scarcity of the metal."

Analysts Navneet Damani and Manav Modi wrote in a note that "material deficits, supply restrictions driven by policies, and concentration of stocks are increasingly playing a role in price determination, indicating a sustainable shift in how silver is priced and traded."

Speculative interest in China

Speculative investment interest in China has also been a key driver of silver prices in recent days. The surge in buying in the silver contract on the Shanghai Gold Exchange during December pushed premiums to a record level, affecting other global indicators.

This rapid rise led the country's only dedicated silver fund to refuse new clients last week, after ignoring repeated risk warnings.

Silver rose by 3.4% in spot trading to $74.90 an ounce by 1:42 PM in Singapore, after hitting a record high of $84.01 in the previous session before its drop.

Gold increased by 1% to $4375.91 an ounce, after losing 4.4% on Monday. Platinum gained 3.4%, while palladium dropped 1.1% after both fell by more than 10% on Monday. The "Bloomberg" dollar spot index fell by 0.1%.