Silver struggles again after futures market raises margin requirements

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Silver’s great bull market of 2011 may be facing its biggest test so far.

The metal was struggling in electronic futures market trading late Monday after the market’s parent, CME Group, again raised margin requirements on silver contracts -- an effort to cool speculative trading activity.

The increase in minimum margins, the cash deposits investors must put up or maintain to trade silver contracts, was the third by CME in a week. Effective at the close of business Tuesday the initial margin will rise to $16,200 per contract from $14,513.

Silver, which fell $2.51, or 5.2%, to $46.08 an ounce in futures floor trading on Monday, was off another $1.45 to $44.63 in electronic trading at about 7:15 p.m. PDT. But the price had rallied from a low of $43.81 at the start of the session.

Silver has rocketed this year, benefiting from inflation worries and as the dollar’s continuing slide has fueled investors’ demand for a hedge against loss of purchasing power in paper currencies. The metal, though notoriously volatile, has become a favorite of many individual investors.

But the price surge has been so relentless in recent weeks it has raised fears of a crash. As of Friday silver was at a 31-year high of $48.58 an ounce, up 57% year to date after six straight weekly gains.

No other commodity has come close to silver’s performance this year.

-- Tom Petruno