Silver slumps on higher margins, gold drops

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SINGAPORE, May 4 (Bloomberg): Silver futures dropped, heading for the biggest three-day fall since March 2008, as an increase in margin requirements on the Comex in New York drove investors away. Gold also fell after a report that Soros Fund Management LLC may have cut holdings. Silver for July delivery slumped as much as 5 per cent to $40.465 per ounce, after losing 7.6 per cent yesterday and 5.2 per cent on May 2. The metal was at $41.175 at 2:01 p.m. in Singapore, taking losses over the three days to 16 per cent. Immediate-delivery gold fell 0.2 per cent to $1,533.28 an ounce, also lower for a third session. CME Group Ltd., Comex's owner, said this week that the minimum amount of cash that must be deposited when borrowing from brokers to trade silver futures will rise to $16,200 per contract at the close of business yesterday, from $14,513. A year ago, the margin was $4,250. "Silver is often the lead indicator for changes in trends, or at least for corrections," David Wilson, an analyst at Societe Generale SA, wrote in a note. After futures rallied to a record $50.35 an ounce in January 1980, prices dropped 78 per cent in four months. Soros Fund Management, the $28 billion hedge fund run by Keith Anderson, has sold much of its gold and silver holdings, the Wall Street Journal reported today, citing unidentified people. Many of the sales took place over the past month as there was a reduced risk of deflation, according to the report. From the start of this year to the end of April, silver futures rallied 57 per cent, peaking at $49.845 on April 25. The metal was the best performer in that period among the 24 raw materials tracked by the Standard & Poor's GSCI Index.