A parabolic surge in the precious metals market came to a crashing halt when gold (GC=F) and silver (SI=F) fell after hitting record highs.
Gold futures dropped 4.5% to little over $4,340 per troy ounce. After briefly reaching $80 per ounce, silver futures fell 8.7%, marking their worst day since 2021.
Due to the Chicago Mercantile Exchange's increase in margin requirements for silver futures, which forced highly leveraged traders to either liquidate their positions or add cash, traders were on edge going into Monday's session.
Concerns are heightened in the race to supply the rapidly expanding AI industry as China, the third-largest silver mining nation in the world, is anticipated to impose export restrictions beginning in January.
Elon Musk commented on the skyrocketing prices of silver over the weekend, saying on X, "This is not good." Numerous industrial processes use silver.
The Silver Institute, a nonprofit trade association, estimates that industrial uses account for over 60% of all silver. Silver is a crucial part of solar panels, data center server boards, and electric cars since it is the best electrical conductor of all metals.
Michael DiRienzo, president and CEO of Silver Institute, told Yahoo Finance, "It's essential for electronics and computing." "It's used in almost everything that has a on and off switch."
DiRienzo notes that the global structural market deficit for silver is in its fifth year. Fears of tariffs and trade restrictions were raised when the metal was added to the US essential minerals list in October.
Gold has increased 67% so far this year due to significant central bank purchases and a weakening dollar, making precious metals an exceptional year.
Due to supply shortages brought on by the metal's industrial use, silver, which has a much smaller market, has been the best performer this year, rising by almost 150%.
This year, even platinum (PL=F) and copper (HG=F) reached all-time highs. However, a precious metals bull has been cautioning against a reversal in the ascent of gold and silver, pointing out that the last time they did so was in 1979 and that prices peaked in 1980 before plummeting.
Earlier this month, Bloomberg Intelligence senior commodity strategist Mike McGlone told Yahoo Finance, "When it gets this stretched, be careful." "The most important thing for people like me who have been bullish on gold forever is two words: Take profits."
