Silver prices plunge after CME doubles margin requirements

Thursday 01 - 14:20

By: Dakir Madiha

Silver prices plunge after CME doubles margin requirements

Silver prices suffered a dramatic plunge in late December 2025, dropping more than 15 percent from a record high near $84 per ounce to around $71. The CME Group triggered this sharp decline with a rare "double whammy" of margin requirement hikes, sparking massive forced liquidations across global futures markets.

Traders dubbed the event the "New Year's Eve Liquidation" after the exchange raised initial margin requirements for March 2026 silver contracts from $22,000 to $25,000 on December 26, followed by a steeper 30 percent increase to $32,500 per contract on December 30. This cumulative 48 percent surge in collateral demands over one week unleashed a wave of margin calls rippling through time zones worldwide.

By the morning of December 31, roughly 13,430 contracts equivalent to over 67 million ounces of silver were liquidated in just 15 minutes as leveraged positions unwound. Silver futures posted their worst daily drop since February 2021, falling 8.7 percent on December 29 alone. The metal ended the year trading near $71 per ounce, still up about 140 percent for 2025, marking its strongest annual gain since 1979.

The crash exposed a widening gap between Western paper markets and physical demand in Asia. While Comex futures tumbled, the Shanghai Gold Exchange traded physical silver at record premiums exceeding $8 per ounce, with spot prices hitting $78 against New York's $72. This split highlights how CME margin tweaks can force sales but cannot conjure the physical supply needed for surging industrial needs, from Chinese solar panel makers to AI infrastructure projects.

Silver mining stocks bore the brunt of holiday-thinned trading volatility. Leveraged plays like First Majestic Silver and Pan American Silver plunged on December 31 as institutional funds rebalanced portfolios. In contrast, First Solar, whose thin-film technology uses 98 percent less silver than conventional panels, held steady as a hedge against price swings.

The CME's move comes as silver shifts from monetary asset to critical industrial commodity. The U.S. government's late 2025 designation of silver as a "Critical Mineral," paired with China's export curbs effective January 1, 2026, underscores its strategic role. Analysts caution that while margin hikes curb speculation, they fail to address the structural supply deficit persisting for five straight years, setting the stage for ongoing volatility into 2026.