Gold (GC=F) and silver (SI=F) tumbled after touching record highs, bringing a parabolic move in the precious metals space to a screeching halt.
Gold futures tumbled more than 4% to hover near $3,400 while silver futures dropped 8% after briefly touching a high of $80 per ounce.
Traders were on edge going into Monday’s session after the Chicago Mercantile Exchange raised margin requirements on silver futures, forcing highly leveraged traders to either add cash or sell their positions.
Meanwhile China, the world’s third-largest silver mining country, is expected to restrict exports starting in January, heightening concerns amid a race to supply the booming AI industry.
Over the weekend Elon Musk weighed in on silver’s exploding prices writing on X, “This is not good. Silver is needed in many industrial processes.”
Nearly 60% of all silver is used in industrial applications, according to the Silver Institute, a non-profit trade organization.
Silver is the top conductor of electricity among all the metals and an essential component of solar panels, data center server boards and electric vehicles.
“Its vital for electronics and computing,” Michael DiRienzo, president and CEO of Silver Insititute, told Yahoo Finance “It‘s used in almost everything that has an on and off switch.”
DiRienzo points out silver is in the fifth year of a global structural market deficit. In October, the metal was placed on the US critical minerals list, prompting fears that it could face tariff and trade restrictions.
Precious metals have had a standout year, with gold surging 67% year-to-date amid strong central bank purchases and an easing dollar.
Silver, which boasts a far smaller market, has been the star performer this year, rallying nearly 150% as the metal’s industrial use has put a focus on supply deficits. Even copper (HG=F) and platinum (PL=F) soared to records this year.
But one precious metals bull has been warning about a reversal in gold and silver’s rise, noting the last time they went up this fast was in 1979, with prices peaking in 1980 and subsequently crashing.
“When it gets this stretched, be careful,” Mike McGlone, senior commodity strategist at Bloomberg Intelligence, told Yahoo Finance earlier this month.
“The most important thing for people like me who have been bullish on gold forever is two words: take profits.”
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
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