This morning (Friday), the market will kick off the New Year under potentially extremely volatile conditions, which may lead to a decline in gold and silver prices. This week, the CME has increased margin requirements for the second time, which is likely to create price fluctuations in both directions.
CME announced the first increase in margin requirements on December 26, which took effect on December 29, while the second hike was announced on December 30 and will go into effect after December 31.
However, there is a significant risk of a sharp drop in the prices of these commodities. In light of the persistent volatility seen over the past two quarters, driven by various geopolitical factors and instability in financial markets, traders should be cautious about entering the market.
Nonetheless, on Friday, I wouldn’t be surprised to witness a movement anywhere from USD 100 to USD 250 with a risk leaning towards the downside.
This downside risk stems from the fact that major global investors, particularly central banks, are monitoring the market and are not anticipated to buy at elevated prices, although Russian and Chinese investors might take the initiative at a lower price.
But I wouldn’t be surprised to see if other central banks step in earlier to take the advantage to buy gold at a cheap rate.
Nonetheless, this doesn’t imply that the underlying principles have altered. In my view, this seems like a strategy to shield silver from further increases. The short supply of physical silver to satisfy industrial demand is widely recognized.
Gold is facing challenges due to rising margin requirements, likely included to create the perception that efforts are being made to avert defaults and maintain the financial stability of the market.
Essentially, the concept is that if traders default, clearing houses possess sufficient collateral to manage the losses stemming from the margins. This situation could also indicate a possibility of greater volatility risks within the market.
Meanwhile, starting January 1, 2026, a significant new development will take effect. The Ministry of Commerce in China is introducing new export licensing regulations for silver, which will replace the previous quota system. This policy aims to ensure that there is sufficient silver available for the country’s expanding industries. It’s a strategic approach by China to safeguard its domestic industrial sectors, including solar panels, electric vehicles, energy, electronics and others.
In the short to medium term, key support levels to monitor are around USD 62 and USD 55. On the upside, if silver prices reach USD 82-85, it could create challenges for the industrial buyers, especially if prices rise above USD90. This is my educated guess, as I can’t definitively predict how the market will respond overall.
However, for those who have been waiting for prices to drop to make a purchase, there may be a good opportunity to buy at lower prices. In the short term, uncertainty will dominate the gold market.
On Friday, January 1, gold is anticipated to face significant pressure during the Asian morning session. Should it fall below USD 4210, it may slide down to test the USD 4050 level. Conversely, a decisive break above USD 4375 could result in additional gains.
This will be a challenging scenario for the US Dollar due to the uncertainty and the factors influencing risk sentiment. Typically, the dollar appreciates as a safe-haven asset.
The Japanese Yen also holds a safe-haven status among currencies. In this context, both currencies can benefit from their safe-haven appeal. However, the outlook for the European currency and the British Pound may vary as the USD could appreciate against both of them.
Copyright Business Recorder, 2026
The writer is former Country Treasurer of Chase Manhattan Bank. The views expressed in this article are not necessarily those of the newspaper
He tweets @asadcmka
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