Gold (GC=F) and silver (SI=F) fell after hitting record highs, bringing a parabolic move in the precious metals space to a screeching halt.
Gold futures fell 4.5% to just over $4,340 a troy ounce. Silver futures fell nearly 8% after briefly touching $80 an ounce.
Traders were on edge entering 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 miner, is expected to restrict exports starting in January, raising concerns amid a race to supply the growing AI industry.
Over the weekend, Elon Musk weighed in on the exploding prices of silver, writing on X, “This is not good. Silver is needed in many industrial processes.”
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Almost 60% of all silver is used in industrial applications, according to the Silver Institute, a non-profit trade organization.
Silver is the best conductor of electricity among all metals and an essential component of solar panels, data center server boards, and electric vehicles.
“It’s vital to electronics and computers,” Silver Institute president and CEO Michael DiRienzo told Yahoo Finance “It’s used in almost everything that has an on and off switch.”
DiRienzo points out that silver is in the fifth year of a structural deficit of the global market. In October, the metal was placed on the US critical minerals list, prompting fears it could face tariffs and trade restrictions.
Read more: How to invest in gold in 4 steps
Precious metals had a standout year, with gold up 67% year-to-date amid heavy central bank buying and a weakening dollar.
Silver, which boasts a much smaller market, has been the star performer this year, rallying almost 150% as industrial use of the metal has put a focus on supply deficits. Even copper (HG=F) and platinum (PL=F) rose to records this year.
But one precious metals bull was warning of a reversal in the rise of gold and silver, noting that the last time they rose this quickly was in 1979, with prices peaking in 1980 and subsequently collapsing.
“When this gets stretched, watch out,” Mike McGlone, senior commodities 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 it on X above @ines_ferre.