Spot gold was 1.8 per cent lower at US$4,775.96 per ounce by 1148 GMT, recovering from nearly a 10 per cent fall earlier in the session. Bullion shed more than 9.8 per cent on Jan. 30, in its sharpest one-day drop since 1983.
Gold has lost about $900 since hitting an all-time-high of $5,594.82 on Jan. 29, erasing most of this year’s gains.
U.S. gold futures for April delivery were up 1.2 per cent at $4,800.50/oz.
Spot silver lost 1.1 per cent to $83.73, recovering from a fall of 15 per cent earlier on Monday. It has shed about 33 per cent since notching up an all-time-peak of $121.64 last week.
The CME announced hikes in margins on its precious metal futures on January 30 and said the changes were set to take effect after market close on Monday.
“The increase in margin requirements makes holding speculative positions less appealing now and this will also force a lot on the retail side of the market who do not have the extra liquidity to sell positions,” said Zain Vawda, analyst at MarketPulse by OANDA.
“It is definitely creating a sort of feedback loop where as prices drop, more traders will face margin calls leading to more selling and even lower prices,” Vawda added.
The dollar index edged higher last week after U.S. President Donald Trump named former Federal Reserve Governor Warsh as his Fed chair pick, making dollar-priced bullion more expensive for buyers overseas.
While investors expect Warsh to favor rate cuts, they anticipate he will tighten the Fed’s balance sheet, a move typically supportive of the dollar.
Barclays said in a note on Monday it expects rate cuts, fiscal expansion, quantitative easing, fiat debasement and de-dollarisation to likely keep investment demand firm for gold.
Spot platinum fell by 3.4 per cent to $2,090.09 per ounce after hitting a record $2,918.80 on January 26, while palladium XPD= shed 0.9 per cent to $1,684.01.
(Reporting by Noel John in Bengaluru; Editing by Alexander Smith and Shailesh Kuber)
