CME Group Raises Comex Gold Margins By 21.5%, Silver Margins By 15.6%

From Kitco, no details yet

 

So even lower prices expected then, right?

 

I think it's to keep everyone from jumping right back in at the same time

 

They're really trying to make it hard, aren't they?

 

Hopefully that's the case!

 

Sounds like a last ditch effort to me

 

Probably to stop Comex getting cleaned out of their silver at these prices? Something akin to Ebay sellers putting their prices up $10k to stop buyers from buying temporarily.

 

The link below has the actual memo sent out by CME.

"CME hikes gold margins by 21%, silver by 16% and copper by 18%."

http://www.zerohedge.com/news/case-closed-cme-hikes-gold-silver-copper-margins

 

Maybe this is a good thing.People can gamble with gold and silver because of the leverage given by these Comex ,etc. facilities.
They can manipulate prices with them.
The more expensive the leverage the less they can do this.
The less they can do this the more gold and silver can find their real price,its fundamental price.Higher.
Maybe these facilities should be completely barred.EFTS,Futures,etc.

 

To encourage the run to treasuries instead of metal maybe?

 

Margin requirements have no effect on people who want to stand for delivery anyway. So it wont stop physical from moving out.

 

As CK mentioned,wont stop delivery as those wanting physical will be paying the full amount anyway. Only the traders will back off possibly moving the spot lower.

 

I don't mean stopping the physical delivery just the initiation of new contracts which would have required x extra ounces of physical to back those new contracts. By making it harder to open new positions therefore they wouldn't need more physical than they currently have. Is that how it works? Physical needs to back those contracts or are they usually cashed out?

 

Good analysis of why the margin increase http://traderdannorcini.blogspot.com/2011/09/cme-hiking-margins-on-precious-metals.html

 

an excerpt from

http://traderdannorcini.blogspot.com/


What positions could a hedge fund actually sell that are PROFITABLE if they need to raise cash? Answer - They have none - the only market that is still showing a profit for this year (other than the treasuries trade) is GOLD. It started the year at $1422 on the Comex and closed today at $1640. That is a gain of 15% on the year even after the whipping put on it this week. A short note here - silver is back to where it began this year so there are no profits left in it after this week.

Now consider that hedge funds are getting a boat load of redemption requests from disgruntled clients and from those who are simply scared stiff and have had enough of the insane volatility. They want their money back even if it means sticking it under a mattress. That requires these funds to sell the assets that they have to raise the necessary cash.

In other words, gold, is the only profitable investment these funds have that is both liquid and available for them to meet margin calls and meet redemption requests. This is why it is being sold. The selling has nothing to do with it not being a safe haven but rather functioning as an extremely liquid investment that has shown them a solid profit. Winners are getting sold to meet losing trades and redemptions. Nothing more; nothing less.

Once this money flows issue is resolved sufficiently, the factors that have led gold to rise will reassert themselves.

 

I thought the higher margins would limit buyers, but what I'm reading is it will increase sellers. So is it written in stone that prices will fall further Monday or that prices will rise less than they would had the margins remained the same. Thanks in advance for helping me out.

 

if the prediction that ETF's will fold comes true then there wont be any margins to be had

 

It is likely to increase the number of sellers in the market as positions are liquidated in cases where the trader is unable to cover the margin requirements themselves - bear in mind that most traders on the COMEX are highly leveraged.

The one thing I would caution you on is your statement "So is it written in stone...". Nothing. Ever. Is written in stone. Ever.

 

Epitaphs are written in stone.

Death is one of the few things you can rely on to occur with any degree of certainty.

 

940palmtx - this is the question and argument. IF this increases the sellers and the spot drops will that increase the buyers wanting delivery? - typically they don't leverage to the same extent as the 'day traders'

Tomorrow will be VERY interesting to watch . Tech analysis suggests we are on a resistance level now - will it hold? bounce? or fall again? With Traders spending the weekend to plan there next move, my guess is it will be pretty violent. If one of the big players hits the sell button the rest will follow, if he hits the buy button an intra day move could swing over $40.

As Midnight Man rightly pointed out - never fall for the 'sure as shyte' trap.