Silver prices tumbled as much as 13 percent in opening trading in Asia -- before news broke that U.S. forces had killed al-Qaida leader Osama bin Laden -- and then partially recovered.
In New York, spot prices for silver dropped as much as 6.7 percent in opening trading. By midday, the price stabilized, down about 3.2 percent at $46.40 an ounce, according to Kitco Metals Inc.
Prices climbed above $49 late last week, and are up about 59 percent this year, with the sharpest gain coming in April.
Jeff Clark, a precious metals analyst with the firm Casey Research, attributed Monday's decline to a move Friday by the CME Group Inc. to curb speculative trading.
"That's probably scaring off some investors, because they don't want to meet the new requirements," Clark said.
CME Group, a commodities and derivatives trading company, tightened restrictions for speculative trading by increasing its maintenance margin on silver trades. That means traders must have additional cash deposited in order to make trades using borrowed money.
The move came in response to recent volatility, CME Group spokesman Chris Grams said. Volume of COMEX Silver futures hit a record last Tuesday, surpassing a level reached last November, CME Group said.
Recent price rises for silver and other precious metals including gold have been fueled in part by the U.S. dollar's weakness against other currencies, and fears that the Federal Reserve's measures to stimulate the U.S. economy could fuel long-term inflation.
With its many industrial uses, silver's rise also is also explained by supply-and-demand fundamentals, with global supplies recently becoming "incredibly tight," Clark said.
The investment market for silver is far smaller than for gold, and the entrance of new investors in the category is helping fuel the price rise, he said. However, he said the trading limits imposed by CME Group could reverse some of that trend.
Stocks of silver mining companies have risen this year, but are up around 5 percent to 10 percent, far behind the price rise for the metal. Clark said that's because the speculative trading has largely focused on prices for the metal, rather than stocks of silver producers.
A look at prices of key silver stocks on Monday at midday:
-- Silver Standard Resources Inc. dropped $1.82, or 5.5 percent, to $31.09.
-- Pan American Silver Corp, fell 79 cents, or 2.3 percent, to $33.34.
-- Silver Wheaton Corp. dropped $1.46, or 3.8 percent, to $37.04.
-- Coeur d'Alene Mines Corp. fell $1.19, or 3.8 percent, to $30.52.
-- Silvercorp Metals Inc. lost 52 cents, or 4 percent, to $12.36.
-- Hecla Mining Co. lost 34 cents, or 3.6 percent, to $9.07. For the latest updates PRESS CTR + D or visit Stock Market news Today
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