PRECIOUS-Silver slides as retail rush retreats

* CME raises Comex 5000 Silver Futures margins by 17.9%
* U.S. commodities regulator monitoring silver activity
* Billion ounces of silver traded in London on Monday - LBMA
* FACTBOX-How silver is traded (Updates prices)
By Shreyansi Singh
Feb 2 (Reuters) - Silver slid more than 8% on Tuesday as
small investors retreated after a rally to a near eight-year
peak the previous session fuelled by a social media-driven
trading frenzy.
Spot silver XAG= fell 8.2% to $26.59 an ounce by 1:54 p.m.
EST (1854 GMT). On Monday, it surged 7.3% to its highest since
February 2013. "It appears that the attempted short squeeze by the smaller
retail traders has at least temporarily failed," said Kitco
Metals senior analyst Jim Wyckoff, adding retail investors were
looking for other markets to impact.
Contributing to the pullback, the CME Group CME.O raised
maintenance margins on silver futures by 17.9% on Monday to
tackle unusual market volatility. Also, posts on the
WallStreetBets Reddit forum at the centre of the last week's
action encouraged traders to steer clear of silver. "If these Reddit investors are going to try to squeeze the
silver market, they're going to have to do it this week,
otherwise it's going to be a flash in the pan," Kitco's Wyckoff
said.
The market gyrations invited scrutiny from the U.S.
commodities regulator. "A coordinated surge in investment by retail traders into
the silver market would simply raise volatility and generate
small regional dislocations in supply-demand dynamics," Goldman
Sachs said in a note.
The largest silver-backed exchange traded fund, the iShares
Silver Trust SLV , added about 20 million ounces of silver to
its holdings on Monday, following a record inflow of about 34
million ounces on Friday. GOL/ETF
Spot gold XAU= , meanwhile, fell 1.4% to $1,835.11 per
ounce. U.S. gold futures GCv1 settled down 1.6% at $1,833.40.
Silver may weaken if gold does not move higher, HSBC analyst
James Steel said in a note.
The current gold/silver ratio is "well below historical
averages, and investors may recognise this level as straying too
far from historical norms".
Platinum XPT= declined 3.5% to $1,088.59, while palladium
XPD= fell 0.2% to $2,241.14.

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