PRECIOUS-Silver slides from 8-year peak as retail frenzy fizzles out

* CME raises Comex 5000 Silver Futures margins by 17.9%
* U.S. commodities regulator monitoring silver markets
activity
* One billion ounces of silver traded in London on Monday
-LBMA

(Adds context, updates prices)
By Asha Sistla
Feb 2 (Reuters) - Silver fell more than 5% on Tuesday as a
GameStop-style buying spree among small investors that took
prices to a near eight-year peak appeared to fade following a
margin hike by the Chicago Mercantile Exchange.
Spot silver XAG= fell 5.3% to $27.44 an ounce by 1320 GMT.
On Monday it jumped 7.3% to its highest since February 2013 in
the latest leg of a retail-driven buying frenzy in heavily
shorted assets such as U.S. video game retailer GameStop
GME.N . CME Group CME.O raised maintenance margins on silver
futures by 17.9% on Monday, a familiar move aimed at reducing
unusual market stress, and posts on the WallStreetBets Reddit
forum at the centre of the past week's action argued for traders
to steer clear of the metal. "The CME move is taking some froth off the market," said
StoneX analyst Rhona O'Connell. The correction was inevitable
and in technical terms, silver is still overbought, she added.
Investment bank Goldman Sachs said in a note that a silver
short squeeze is "unattainable".
"A co-ordinated surge in investment by retail traders into
the silver market would simply raise volatility and generate
small regional dislocations in supply-demand dynamics," the bank
said.
The recent retail frenzy has left global dealers scrambling
for bars and coins to meet demand, while also pushing the U.S.
commodities regulator to monitor the market. Meanwhile, 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 1.3% to $1,836.21 per
ounce. U.S. gold futures GCv1 shed 1.1% to $1,844.
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 2.6% to $1,098.32, while palladium
XPD= was up 0.2% to $2,249.43.

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GameStop slides, silver spree stalls as retail traders run out
of road - Reuters News funds bet rally in Canadian silver-mining stocks to run
out of steam raises silver margins by 17.9% or silver? Reddit investors worry about losing
GameStop focus ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>