Gold extended its biggest slump in 18 months on speculation financial markets are stabilising, eroding demand from investors seeking to protect their assets, and after CME Group raised margins on futures contracts. Gold fell as much as 3.1 per cent to $1,704.25 (Dh6,259.97) an ounce by 1.16pm in London, taking its three-day decline to ten per cent, the most since 2008. Compared with closing prices, the rout is also the biggest since then. The value of a 100-ounce futures contract traded in New York slumped $10,400 on Wednesday, more than the $7,425 margin requirement that day, prompting CME to increase the minimum cash deposit. \"Gold is a trade, gold is a position, gold is volatile, but gold is not safe,\" economist Dennis Gartman wrote yesterday in his Suffolk, Virginia-based Gartman Letter. \"The public is involved in gold, and the cab drivers of the world have bought into it. Now they are being taken out, at high cost.\" The metal is in the 11th year of a bull market, the longest winning streak since at least 1920 in London, as investors seek to diversify away from equities and some currencies. Central banks are adding to reserves for the first time in a generation, joining billionaire investors including John Paulson in hoarding bullion. The Federal Reserve has taken the unprecedented step of saying it will keep borrowing costs at almost zero at least through mid-2013 to support the economy. CME raised margin requirements after gold futures surged to a record above $1,910 an ounce this week and then plunged the most since March 2008. The minimum cash deposit to borrow from brokers to trade gold futures will rise 27 per cent to $9,450 per 100-ounce contract in the speculative Tier 1 category at the close of trading Thursday, CME said. The maintenance margin will rise to $7,000 from $5,500. The Shanghai Gold Exchange said on Tuesday it would hike margins from settlement yesterday. \"In our opinion the margin is not nearly high enough yet,\" Gartman said. \"Proper margining would seem to be closer to $15,000 per contract, for given the volatility that exists presently the exchange needs to protect itself and its clients from the possibility that a large speculator or two or three cannot put the exchange into jeopardy.\" Speculators held a net 218,403 futures and options contracts by August 16, US Commodity Futures Trading Commission data show. Positions reached 253,653 contracts by August 2, the most since at least 2006, the data show. Immediate-delivery gold fell 3.8 per cent Wednesday after touching a record $1,913.50 on Tuesday and was last down two per cent at $1,724.07, the lowest price since August 12. The metal for December delivery was down 1.8 per cent at $1,726.30 on the Comex in New York. Futures, which reached an all-time high of $1,917.90 on August 23, tumbled 5.6 per cent on Wednesday. Speculation Gold fell on Wednesday on speculation financial markets may be stabilising after reports on durable-goods orders and home prices beat analyst estimates. Global equities touched a one-week high Wednesday. The ten-day historical volatility for gold futures jumped to 41 per cent, the highest level since March 2009, data compiled by Bloomberg show. Silver slumped as much as 35 per cent in London in about three weeks from its April 25 record of $49.79 an ounce after CME announced margin increases. Exchange-traded-product holdings of gold fell for a fourth day yesterday and the most since January, sliding 26.9 metric tonnes to 2,154.7 tonnes, data compiled by Bloomberg show.