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PRECIOUS-Silver retreats from 8-year peak as retail surge loses steam

* CME raises Comex 5000 Silver Futures margins by 17.9%

* U.S. commodities regulator monitoring silver markets activity (Adds comments, updates prices)

Feb 2 (Reuters) - Silver dropped more than 5% on Tuesday, retreating from a near eight-year peak in the previous session, as a margin hike by the Chicago Mercantile Exchange called a halt to the latest leg of the social media-driven GameStop frenzy on financial markets.

Spot silver slipped 4.8% to $27.59 an ounce by 0811 GMT, after jumping 7.3% to hit its highest since February 2013 at $30.03 on Monday, as the pack of small-time investors shifted into the market following calls on Reddit and other platforms.

CME Group raised Comex 5000 Silver Futures maintenance margins by 17.9% on Monday 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.

“(Higher margins) will temper the buying frenzy and we could see prices drop as much as to $26 in the next two weeks. It’s also triggering some profit booking,” said Vincent Tie, sales manager at Silver Bullion.

Raising the margins investors must post to trade is a familiar move by CME, the world’s biggest futures and commodities-centric market, when it aims to head off unusual market stress and volatility.

It follows similar moves to cap the market action by some of the easy access online platforms who were the main conduits for the recent surge in videogame retailer GameStop and other U.S. stocks.

Spot gold fell 0.8% to $1,846.04 per ounce. U.S. gold futures shed 0.7% to $1,850.10.

Platinum declined 2.5% to $1,099, while palladium was steady at $2,246.23.

“As the reality dawns that some of the stories surrounding silver were not really true, the recent froth in the market could come down,” said Harshal Barot, a senior research consultant for South Asia at Metals Focus, but added: “Expect volatility to continue.”

The retail frenzy that started last week has left global dealers scrambling for bars and coins to meet demand, while also pushing the U.S. Commodities regulator to monitor the market.

The fact that silver moved up without similar spikes in other precious and industrial metals “suggests that it’s an outlier of sorts and therefore vulnerable to come down quite strongly,” said ED&F Man Capital Markets analyst Edward Meir.

Reporting by Sumita Layek in Bengaluru, additional reporting by Diptendu Lahiri; editing by Rashmi Aich and Jason Neely

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