Taking Delivery

 

Silver Stumbles On (More) Margin Hikes, Export Restrictions

As we detailed earlier in the week, the immediate catalyst for silver's sudden slump was not a single factor but a multitude that cracked the massively overbought precious metal (including export restrictions, US and China margin hikes, ETF flows, etc).

Many, including us, warned that during the holiday period, traders could experience bouts of extreme volatility given the lower liquidity, but prices were expected to rise overall.

That 'volatility struck over the weekend with Monday's big price retreat:  silver prices did take a significant downward presumably because of another increase in margin levels at the CME during a very illiquid time of year, and positions being adjusted, with initial margins jumping $3,000/oz from $22,000/oz to $25,000/oz.  This followed an increase on Dec 12th, 2025, with a 10% increase in margins to the $22,000/oz level.  

And overnight we saw more volatility (downside price pressure) for silver as CME Group raised margins on precious-metal futures for the second time in the space of a week following a volatile period of trading that saw prices spike then retreat.

Margins for gold, silver, platinum and palladium contracts will increase after the close of business on Wednesday, the group said in a statement dated Dec. 30. The decision was made based on a review of “market volatility to ensure adequate collateral coverage,” it said.

The hikes mean that traders need to put up more collateral when they trade precious-metals futures to ensure they can meet their obligations. Earlier, higher margins kicked in from Monday.

Finally, as we detailed earlier in the week, China is set to tighten controls on silver exports from Thursday, expanding restrictions on the once-ordinary metal critical to the U.S. industry and defense supply chains.

But, the rules are not new. China's Commerce Ministry first announced the new measures in October to strengthen oversight of rare metals, on the same day that U.S. President Donald Trump and Chinese President Xi Jinping met in South Korea. At the time, Beijing agreed to a one-year pause on certain rare earth export controls, while the U.S. rolled back tariffs.

As CNBC reports, earlier this month, China released a list of 44 companies approved to export silver under the new measures in 2026 and 2027. The new rules in 2026 also restrict exports of tungsten and antimony, materials dominated by China's supply chain and widely used in defense and advanced technologies.

While China hasn't explicitly announced a blanket ban on silver exports, the state-run Securities Times on Tuesday cited an unnamed industry insider, who said the new policy formally elevates the metal from an ordinary commodity to a strategic material, placing its export controls on the same regulatory footing as rare earths.

Nevertheless, the imminent change has prompted hectic scenes of physical demand in China...

While there has been much talk of Silver being in a bubble, SocGen explained here why they disagree with the 'models', and we now note that silver no longer officially 'overbought'...

In conclusion, Alasdair Macleod warns that the derivative difficulties advertised so loudly in silver contracts tell us that there is a wider and larger commodity pricing problem. Baskets of other commodity and raw material categories are also telling us that if they are to normalize, their dollar prices will rise dramatically in 2026-2027.

It is the currencies which are the problem. Meanwhile, there is nothing likely to stop silver prices rising much further. We can only hope it happens in an orderly fashion.

For now, the decline is stable and hardly indicative of a herd rushing for the exits. But a thin liquidity holiday-shortened week could exacerbate any moves.

via zer0hedge