Gold and Silver Prices Plunged Monday After Last Week's Big Rally. Here's Why.

Core Insights - Precious metals, including gold and silver, experienced a significant price drop after a week-long rally, attributed to CME Group's increase in margin requirements for metals contracts [1][3][9] Price Movements - Spot gold peaked at $4,565 per troy ounce but fell over 4% to $4,355, while spot silver dropped nearly 9% to just above $73 after reaching a high of over $84 [2][4] - Despite the recent declines, gold prices are still 65% higher year-to-date, and silver has increased by approximately 150%, indicating strong annual returns [5][9] CME Group's Margin Requirement Changes - CME Group raised margin requirements for precious metals contracts, effective Monday, which requires traders to deposit more cash to cover potential defaults on futures contracts [3][6] - This adjustment is a common response from exchange operators following significant price rallies, aimed at managing risk in trading [3] Investor Behavior and Market Trends - The surge in precious metals prices this year has been driven by geopolitical uncertainties, inflation concerns, and the Federal Reserve's interest rate cuts, making metals more appealing compared to yield-producing assets [7][8] - The recent price rally was also influenced by a supply squeeze in silver and strong industrial demand, particularly towards the end of the year [8]