Moreover, silver for July delivery, at the Commodity Exchange (COMEX), dropped as much as 11.90 per cent, biggest fall since 2008, to US$40.600 an ounce due to heavy selling pressure after the Chicago Mercantile Exchange (CME) Group, Inc. increased the initial margin money by 13 per cent to US$14,513 per contract from US$12,825.
The initial margin money is the amount of cash that traders need to deposit with exchange for speculative positions. Increased margin money forced investors to reduce their positions, resulted a downward pressure created on silver futures prices. Gold futures also fell in the domestic market as safe haven demand decreased after al-Qaeda leader Osama bin Laden was killed by the U.S. military on Monday.
Moreover, holdings in world"s largest silver backed traded fund, iShares Silver Trust (SIV), declined 1.1% to 15,169.80 metric tons yesterday.
Silver for May contract, at MCX, closed at Rs.62,517.00 (down by 7.86 per cent) after opening at Rs. 66,999.00 against the previous closing of Rs. 67,856.00 with intra-day low of Rs. 61,824.00 with a business volume of 2,683 lots.
At COMEX, silver for July contract closed at US$42.585 per ounce, down by 7.59 per cent, after opening at US$44.030 against the previous closing price of US$46.084 per ounce. It touched the intra-day low of US$40.600 with a business volume of 78,417 lots.
Gold for June contract, at MCX, closed at Rs.22,373.00 per 10 grams, down by 1.12 per cent, after opening at Rs. 22,601.00 against the previous closing price of Rs. 22,626.00 with intra-day low of Rs. 22,320.00 per 10 grams.
At COMEX, gold future for June contract closed at US$1,540.4 per ounce, down by $16.7, after opening at US$1,545.2 against the previous closing price of US$1,557.1 per ounce. It touched the intra-day low of US$1,516.2 with a business volume of 211,656 lots.
Silver futures prices climbed 28 per cent in April 2011, the largest monthly gain since January 1983, and reached an all time high of US$49.752 an ounce on April 25, 2011 in the spot market.
Silver prices got support from weakening of the U.S. dollar after the Federal Reserve kept the policy rate unchanged at a range of zero to 0.25 per cent, and fed Chairman Ben S. Bernanke indicated that he will continue to pump money in the economy. Moreover, rising global inflation also prompted the speculators to buy precious metals as a protection of their wealth.