Shanghai Gold Exchange cuts silver margins, volumes soar

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Shanghai Gold Exchange cuts silver margins, volumes soar
Reuters ^ | 2011-05-13 09:02:51 | by Ruby Lian and David Stanway

Posted on Friday, May 13, 2011 2:25:49 PM by DeaconBenjamin

* SGE will cut silver margins from May 13

* To keep daily moving limits unchanged

* SGE silver forward contract closes up 2.4 pct

SHANGHAI, May 13 (Reuters) - The Shanghai Gold Exchange (SGE) will cut silver margin requirements to 18 percent from 19 percent from May 13 settlements if there is no sharp movement in prices, it said on Friday.

News of the margin decrease helped push the SGE silver forward contract up by 2.4 percent to close at 7,845 yuan ($1,207) per kilogram.

Trading volumes for the contract have surged. According to data from the SGE, volumes rose 3,043 percent from the start of the year to 2,256,280 kg on Friday.

"I think the lowering of the cost of trading could have helped in bringing silver investors back into the market today," said Ong Yi Ling, analyst with Phillip Futures.

The SGE has hiked margin requirements for its silver forward contract five times since April 25 in order to curb volatility in the market.

"Silver is now the most speculated metal and any lowering of margins will lure more investors back," said Hong Kong-based physical gold dealer Ronald Leung.

The exchange also said it would keep daily price move limits unchanged, after lifting them to 13 percent on Thursday from 10 percent set on May 9.

Ong said the surge in speculative silver trade in Shanghai was unlikely to be a factor behind the rapid rise and subsequent crash in global silver prices over the year.

"China is no doubt a big buyer of silver but it is pricing during the U.S. trading hours that drives the market more than that during the Asian trading hours," Ong said.

Spot silver hit a record of $49.51 an ounce on April 28, a rise of 170 percent in a year, but has fallen nearly 30 percent from the high. ($1 = 6.499 yuan)