Margins On Gold Hiked 27%

[mandynshane]

Any opinions ??

Article    http://www.forbes.com/sites/afontevecch ... -in-a-day/

[MediumTex]

Market noise.

It's like currency interventions.  It gooses the market in a certain direction for a day or so, and then things start to move back to the primary trend.

[mandynshane]

Is it normal to do when the price of gold was going down anyway?  It's been falling for the last 2 days..

[AdamA]

Is it normal to do when the price of gold was going down anyway?  It's been falling for the last 2 days..

It's been rising for the past 11 years.

[Gumby]

Is it normal to do when the price of gold was going down anyway?  It's been falling for the last 2 days..

The margin hike is normally triggered after a dramatic price rise. It happens all the time. Gold investors try to lock in profits when they know a margin hike is likely imminent — hence the large drop. As MT said, it's a temporary reaction. This isn't the first margin hike, and it won't be the last.

[SmallPotatoes]

After watching the PP perform for a while dips like this come as no surprise and are of no consequence.

[Gumby]

More margin hikes are expected over the next few days. This should shake out the remaining traders using leverage. Probably a good thing over the long run.

Interactive Brokers bulletin board

To HKFE,HKMEX,NYMEX,NYSELIFFE traders:
Fri Aug 19 13:29:35 2011 EST

As a result of the volatile trading environment at the present time, please be advised that Exchange margins and House margins are likely to increase over the next couple of days. For exchange- specific increases, please visit the respective websites. IB will also be increasing the gold derivatives margin. Please monitor any affected holdings closely and manage your risk accordingly.

[Gumby]

Looks like the PM selloff was fueled by an off-hours margin hike. CME hiked gold margins by 21%, silver by 16% and copper by 18%.

http://www.scribd.com/doc/66096748/Gold ... -Hike-9-23

[Jan Van]

Yummie. Maybe now's the time to buy a few gold coins! REAL gold, not them weird ETFs... 

[moda0306]

j,

I've been thinking the same thing.  Though I'm a deflationist... I definitely think gold should settle in around $2-3k.

I think what we're seeing is a nice buying opportunity.

[stone]

This link is often helpful about the gold market http://jessescrossroadscafe.blogspot.com/

My guess is that the underlying reasons for gold to increase in price still hold. The margin hike just creates a tempory blip and the underlying trend will still hold unless we get positive real interest rates and/or less wealth inequality. I'm guessing that the September 27th gold options expiry date will be a good buying time.

[stone]

http://www.moneycontrol.com/news/commod ... 89721.html

has lots of interesting stuff about correlations of gold with SP500, USD and LTT at various times.

[Gumby]

Mish says it wasn't the margin hikes that caused the selloff (though they certainly didn't help). A broader look at (he thinks) is going on...

http://globaleconomicanalysis.blogspot. ... o-its.html

[stone]

Gumby, that link all makes sense apart from where it says only short term treasuries will do OK. He does not explain at all why he considers LTT a bad thing to hold. In the last couple of days, for the UK PP at any rate, it has been long term treasuries that have saved things.

[Gumby]

Gumby, that link all makes sense apart from where it says only short term treasuries will do OK. He does not explain at all why he considers LTT a bad thing to hold. In the last couple of days, for the UK PP at any rate, it has been long term treasuries that have saved things.

I think he's referring to the possibility of a 2008-style meltdown, where cash is the only safe haven.

I just think it's interesting that no one really knows what's happening — everyone seems so confused.

[stone]

Gumby, did LTT fall much at any point during 2008? Late in 2008 LTT did well didn't they? Yen was the best thing to hold in 2008 as far as I know. For a UK investor GBP cash was very bad in 2008 but not as bad as stocks. The GBP devalued a lot versus Euro, USD, Yen (especially). I thought US banks were counterparties to a lot of the CDS for Euro PIIG bonds. I suppose the USD is so big it could cope with a total wipe out of the US financial sector? The UK is very exposed because our banks are so big in relation to our economy.

[Gumby]

Gumby, did LTT fall much at any point during 2008? Late in 2008 LTT did well didn't they? Yen was the best thing to hold in 2008 as far as I know. For a UK investor GBP cash was very bad in 2008 but not as bad as stocks. The GBP devalued a lot versus Euro, USD, Yen (especially). I thought US banks were counterparties to a lot of the CDS for Euro PIIG bonds. I suppose the USD is so big it could cope with a total wipe out of the US financial sector? The UK is very exposed because our banks are so big in relation to our economy.

You're right. I always had assumed that LTTs fell (along with the PP), but the truth is that they just puttered along for most of the year.

I assume that cash is king during a panic/deflationary crash. And I'd think that a wipeout of the financial sector would be good for short term treasuries — since people would be clamoring for cash at that point.

Anyone know why LTTs didn't take off sooner in 2008? My day-by-day history of July to December 2008 is a bit rusty.

[Jan Van]

The Big Picture on Precious Metals Margins

There has been a bit of misinformation and faux outrage about the CME margin requirements for Gold, Silver, and other precious metals, as well as Copper.

I do not think people understand what this means, and why the CME is doing this.

To begin with, commodities are purchased with futures contracts, which offer enormous leverage to speculators. As of this Monday, the minimum cash deposit for trading gold futures will be $11,475 per 100-ounce contract — at $1700 per ounce, that is a $170,000 position. The leverage is nearly 15 to 1. Stocks and bonds, for comparison, trade at 2 to 1 maximum leverage using firm margin. At 15-1, a less than 7% move against you wipes out your capital entirely.

Put it in other terms, if you have $100,000 to speculate with, you can purchase $200,000 worth of stock, or using the same $100k, you can buy $1,481,481.48 in gold futures.

[Gumby]

Yikes...

CME Goes To Collateral DefCon 1: Makes Maintenance Margin Equal To Initial For... Everything!?

[stone]

Might that create a bargin dip for gold next week?

[Gumby]

Might that create a bargin dip for gold next week?

It might create a bargin dip for a lot of things. I suppose it depends on how much leverage/margin is out there right now. Imagine anyone with a margin account getting margin calls on the same day for everything.

[stone]

Gumby, This is all very mysterious to me. I have no idea to what extent the prices of various assets are set by such futures trading. I got the impression that in the UK the FTSE100 are but the small caps are not really. The FTSE100 seems to move in steps. It opens and instantly flips to a different level and that is what the price setting largely consists of.

[Gumby]

CME released a clarification and ICE is following their lead:

CME Issues Clarification On Margins: To Usher More Risk, Less Liquidity In MF Aftermath
ICE Follows In CME Footsteps, Lowers All Initial Margin

It's not the panic situation that we were originally lead to believe, but it does seem like we may be seeing more liquidity issues in the near future.

[murphy_p_t]

Market noise.

It's like currency interventions.  It gooses the market in a certain direction for a day or so, and then things start to move back to the primary trend.

primary trend still intact