Silver Market Volatility: CME Margin Hikes vs. Physical Squeeze

Silver (XAG/USD) is facing a liquidity shock after the Chicago Mercantile Exchange (CME) raised margin requirements for the second time in two weeks. This regulatory tightening clashes with a severe structural shortage in the physical market.

The Liquidity Squeeze

The CME raised initial margins for the March 2026 contract to roughly $25,000, forcing leveraged speculators to either inject capital or liquidate positions. historically, aggressive margin hikes (notably in 1980 and 2011) have marked cycle tops, triggering massive deleveraging events.

Physical Disconnect

However, unlike previous speculative bubbles, the physical floor remains robust:

Outlook: Expect extreme two-way volatility. While margin hikes favor a short-term price correction, the physical depletion suggests a high floor for the metal.