The price of gold has seen some tumultuous days recently, losing ten percent of its value in less than a week and currently sitting about 15 percent off its peak. While that has been covered extensively, it hasn't been quite as widely reported that silver has taken even a bigger tumble: It's lost more than 25 percent of its value within the past week.
What happened to drive the price down? The answer may lie not so much in supply and demand as in margin rules. Buying an investment on margin, as you probably recall, means putting down only part of the purchase price, and borrowing the rest. The Shanghai Gold Exchange just last week raised the silver margin requirements by 20 percent, which apparently triggered the fall in price.
You might not attribute the drop solely to the rules of the Chinese market - except that there was another silver price plunge earlier in the year, right after the Chicago Mercantile Exchange raised its own margin requirements for silver. Yet another lesson in one of the most important principles of investing: The global supermarket is a complicated place.
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