Is short squeeze over? Silver and gold futures plunge

Both silver and gold futures tumbled on Monday, putting the brakes on what has been a historic rally this year for the precious metals.

Silver futures plunged 7.8%, while gold futures dropped 4.4% to start the last trading week of 2025.

Investors were bracing for a crash after the Chicago Mercantile Exchange (CME), one of the world's largest commodity trading floors, said on Friday that it was increasing margin requirements for gold, silver and other metals.

The CME said the move was being made "per normal review of market volatility." The new margin requirements went into effect at the start of trading on Monday.

As part of the increase, the initial margin requirement for a March 2026 silver futures contract is $25,000, up from $20,000.

The margin requirement hike mandates that traders put up more cash on their bets as a way to guard against the possibility that the trader will default when they take delivery of the contract. Exchanges will often do this when a commodity or a security goes on a significant rally.

Silver futures had briefly reached a record $80 an ounce before the CME posted its notice on its website on Friday. Silver futures began 2025 at about $30 an ounce.

This was CME's second margin requirement hike in two weeks.

Gold has gained about 70% this year, and silver has surged approximately 150%. Both commodities have had their best year since 1979.

Tightening supply drives up demand

One of the main drivers of the silver rally has been driven by the tightening physical supply of the precious metal. China, which controls between 60% and 70% of the global refined silver market, will begin reducing its exports on Jan.1, 2026.

Beijing plans to limit its exports to large, state-certified silver producers.

This supply reduction comes as silver is seen playing an increasingly crucial role in the manufacturing of AI chips, electric vehicles, data centers and solar panels.

Elon Musk sounded the alarm on China's restrictions in a response to a post on X about Beijing's move.

In that post, Mario Nawfal, founder of IBC Group Official, said that silver is "the most electrically conductive metal on Earth, making it irreplaceable in many applications," while also pointing to China's dominant position in its manufacturing.

“Export restrictions mean tighter supply, higher prices, and potential bottlenecks for green energy and tech manufacturing worldwide,” Nawfal said. “The energy transition just got more expensive.”

Musk responded by saying, "This is not good. Silver is needed in many industrial processes."

Peter Schiff, chief economist and global strategist at Euro Pacific Asset Management, and one of the market's most prominent gold and silver bulls, said on Monday that the pullback on silver was an opportunity for investors to buy the dip, arguing that "the historic bull market still has a long way to run."

Schiff noted that after the price of silver had dipped more than 9% on Monday, it wiped out all of its gains on Friday when it had reached the historic $80 an ounce mark.

“Yet silver stocks, which barely rose on Friday, have lost all of last week’s gains, despite silver being about 10% above the prior week’s close,” Schiff said. “Following a 14% silver correction, silver stocks are even better buys now.”