The Shanghai Gold Exchange raised margin requirements on gold and silver futures for the sixth time this year, in a bid to rein in speculative fervor following the US Federal Reserve’s first rate cut of 2025.
The move came after a record-breaking run in precious metals. On Tuesday, COMEX gold futures surged past $3,800 an ounce, up 8% for the month of September. Silver jumped to $44.80, its highest level since 2011, with prices rising 9% this month and more than 51% so far this year.
The exchange’s repeated tightening steps highlight regulators’ concern that extreme price moves could destabilize trading, even as investors continue piling into safe-haven assets amid shifting monetary conditions.
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What repeated margin hikes signal
1. Cooling speculation
Exchanges raise margin requirements to make leveraged trading more expensive. It forces traders to put up more collateral, discouraging highly leveraged bets and helping curb runaway speculation.
2. Liquidity squeeze risk
Higher margins can trigger forced liquidations if traders cannot meet collateral calls. This can lead to sharp intraday swings or sudden pullbacks, especially in fast-moving markets like gold and silver.
3. Regulatory signal
Six hikes in a year is unusual and signals regulators are uneasy with the speed and scale of the rally. It suggests authorities see a risk of destabilisation if prices keep surging unchecked.
4. Investor takeaway
While fundamentals (Fed cuts, safe-haven demand, inflation hedging) support metals, repeated margin hikes raise the risk of short-term corrections. Long-term bulls may stay invested, but traders need to watch for increased volatility around liquidation cascades.
