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Steadfast
17th December 2009, 10:29
This just in!

COMEX Gold And Silver Margin Requirements Raised



-- Posted Thursday, 17 December 2009 | Digg This Article | | Source: GoldSeek.com
By: Trace Mayer, J.D.

The COMEX has raised the margin requirements for gold and silver futures contracts. Additionally, gold is trading in minor backwardation but this is probably not serious. The margin requirement rise validates the strength of the bull market. There will likely be additional margin requirement increases during this upleg.

MARGIN REQUIREMENT
A margin, or performance bond, is collateral that the holder of a position in futures contracts, securities or options has to deposit to cover credit risk. The use of margin greatly amplifies either the gain or loss with a position. The higher the margin requirement the more capital is required to control the same amount of the underlying asset.
One consequence that can result from using margin to purchase assets is a margin call. If the margin posted in the margin account is below the minimum margin requirement then the broker or exchange issues a margin call. The investor has to either increase the margin deposited or close the position and can be accomplished by selling the securities, options or futures if they are long and by buying them back if they are short.
If they do not do any of this the broker can sell his securities to meet the margin call. If the exchange is unsuccessful in executing margin calls and receiving enough capital then the exchange could fail.
The COMEX has recently raised the margin requirements for gold and silver contracts.

The result of these increases in the margin requirements will likely be somewhat bearish for the metals in three to six months. This is because it will require more capital to control the same amount of the commodity and will serve to dampen some of the speculative hot money which has been flowing into the metals lately.
Margin requirements and other exchange rules are what put a damper on the Hunt brother’s plans. Overnight the rules were changed without notice and it resulted in tremendous losses and margin calls to the Hunts. The effect of margin requirements on the instruments of the gold price suppression scheme does cause some questioning. For example, are they even subject to the requirements?

GOLD AND SILVER BACKWARDATION
As of 16 December 2009 there has been some minor backwardation appearing for both gold and silver. For example, gold for delivery in December 2009 was higher than the January, February and April contracts.

Likewise the LBMA silver forwards have been showing some particularly interesting activity since about 24 November 2009. For example, the SIFO for one month was higher than all other months on 15 December 2009. The 16th showed similar unusual activity. Silver only recently slippped out of significant and prolonged backwardation in June 2009.
This bout of both silver and gold with backwardation is likely minor or immaterial. With gold it is likely due to delivery considerations. With silver there would need to be a prolonged condition to merit much more attention. Either way this is a condition to observe. Backwardation in the monetary metals implies loss of confidence in the paper instruments and both the desire and ability to take immediate possession without the use of margin.

PRECIOUS METALS BULL
As the gold, silver and platinum precious metals bull continues gaining intensity it will gather in more capital. With their use as currency in ordinary transactions, through services like GoldMoney, it will continue to increase the percentage of the total market that is owned outright. Already, most physical gold bullion is owned outright without any attaching liabilities in jewelry, coin or bar form by either individuals or massive central banks. This adds stability to the market because when an asset is owned outright then the owner cannot be margin called.
By analogy one of the reasons the US residential property market, which is heavily purchased on margin, is in such dire straits is because of the constant ‘margin calls’, the surplus inventory which is put on the market after foreclosure which results in further declines in market prices and more margin calls. In contrast, real estate in Argentina is 93% owned outright with only 7% encumbered. This adds tremendous stability to prices.
The increase in margin requirements on the precious metals will only serve to strengthen the bull market. But in the short term the effect could be to depress the price because of margin calls to speculative hedge funds.

CONCLUSION
There is old advice that the market can remain irrational longer than you can remain solvent. But this advice applies if margin is used. Gold, silver or platinum that is completely paid for becomes sovereign wealth, cannot be margin called and therefore the owner can hold it indefinately without fear of insolvency. Unlike with a margin call there is no forced selling. Holding the monetary metals in such a way is in harmony with provident living principles and a safe way to buy gold.

DISCLOSURES: Long physical physical gold, silver, platinum and no position the problematic SLV or GLD ETFs.
Trace Mayer, J.D.
--
http://www.RunToGold.com

-- Posted Thursday, 17 December 2009

:D:D All I can say is WOOOHOOOOO! :D:D

Katwoman
17th December 2009, 10:38
. Are these guys smoking crack? Since when is gold in backwardization not serious? After all from a historical perspective backwardization is not a common phenomenon.

IMHO I think woooo hoooo is an understatement!!

Steadfast
17th December 2009, 10:47
This is probably some of the best news for Physical Silver in the "LONG TERM" that we have heard all year!

Yup! Comex and the ETF bankter's panic is just starting to Show!
Now let's sit back and watch them scramble like roaches to raise the cash to cover their paper...
That's what happens to you when you naked short! EVERYTIME!

WOOOO HOOO! again!

LETMYSILVERGO
17th December 2009, 12:44
This is probably some of the best news for Physical Silver in the "LONG TERM" that we have heard all year!

Yup! Comex and the ETF bankter's panic is just starting to Show!
Now let's sit back and watch them scramble like roaches to raise the cash to cover their paper...
That's what happens to you when you naked short! EVERYTIME!

WOOOO HOOO! again!

AAAHHH, THIS GIVE ME A NEW IDEA FOR THE NAME OF OUR NEW MONEY--

" The NAKERO"

What is Truth?
17th December 2009, 13:09
So how is this good news? If the margin requirements are raised then won't that discourage investments into silver/gold?

Katwoman
17th December 2009, 13:35
In a word no. Most people who are buying gold and silver today are buying physical which is why we keep seeing backwardization. The more people who demand to hold physical as real money the less stable the paper market futures become. This is hard to comprehend to equities investors who only deal with paper but when you have something that is tangible the situation you are seeing here emerges as a reality.

wdwexe
17th December 2009, 13:40
I don't invest into silver or gold, I purchase silver.

What is Truth?
17th December 2009, 13:41
I don't invest into silver or gold, I purchase silver.

O.K, thanks for letting us know. ;)

LETMYSILVERGO
17th December 2009, 15:30
O.K, thanks for letting us know. ;)

I'm glad we got that cleared UP. {ended my sentence with a prepasiton. } speeling

What is Truth?
17th December 2009, 15:34
I'm glad we got that cleared UP. {ended my sentence with a prepasiton. } speeling

Is that you Mrs. Eskilen? I'll try HARDER. :mrgreen:

Burticus
17th December 2009, 18:20
This is probably some of the best news for Physical Silver in the "LONG TERM" that we have heard all year!

Yup! Comex and the ETF bankter's panic is just starting to Show!
Now let's sit back and watch them scramble like roaches to raise the cash to cover their paper...
That's what happens to you when you naked short! EVERYTIME!

WOOOO HOOO! again!

This may NOT be good news short to medium term PM prices. Sure, the bankster cartel is squirming over covering their shorts, which is probably why they ordered the margins increased, to shake out and reduce the profit margin for the leveraged longs, including hot money technical/momentum traders. Same shady underhanded trick used on the Hunt brothers in 1980...change the rules in the middle of the game.

Don't forget, the banksters' racket is paper and they can get unlimited quantities of freshly-printed/keyed FeRNs, more than needed to cover their margin increase in the tiny precious metals markets. Leveraged longs have to work for or steal their money. Still, with backwardization, this can be viewed as an act of desperation to avoid having to produce real metals that the shorts obviously do not have.

I am "all in" silver long-term and do no short term trading, so am not terribly concerned about the price drop. However, one of my old pals in Sacramento Cali is on his way to Jason Hommel's Rocklin Coin Shop with 20,000 FeRNs, so I would appreciate any advice from our best analysts about whether he should turn his car around and wait until next week, in case there is another shake out of the weak hands.

LETMYSILVERGO
17th December 2009, 18:44
Is that you Mrs. Eskilen? I'll try HARDER. :mrgreen:

no it's just me, CAN U GIVE DETENTION TO 3RD GRADERS?? IF NOT, THEN WE ARE BOTH SAFE. AND QUIT CAPITALIZING EVERYTHING,

AND DON'T PCIK UP HICH-HIKER WITH AXES.

JesterJay
17th December 2009, 19:15
Or does LMSG have the BEST conversations on the forum....
With Himself!!!!!?
JesterJay



no it's just me, CAN U GIVE DETENTION TO 3RD GRADERS?? IF NOT, THEN WE ARE BOTH SAFE. AND QUIT CAPITALIZING EVERYTHING,

AND DON'T PCIK UP HICH-HIKER WITH AXES.

LETMYSILVERGO
17th December 2009, 21:11
Or does LMSG have the BEST conversations on the forum....
With Himself!!!!!?
JesterJay

NO COMMENT { NOTE TO SELF -- shut up !! }

gottago
17th December 2009, 22:32
Or does LMSG have the BEST conversations on the forum....
With Himself!!!!!?
JesterJay


Funny thing is that in some small way I can relate to the ramblings of that brain cell that keeps bouncing back and forth between his ears...:)

LETMYSILVERGO
17th December 2009, 23:18
Funny thing is that in some small way I can relate to the ramblings of that brain cell that keeps bouncing back and forth between his ears...:)

I CAN'T PROVE IT, BUT I'M PRETTY SURE I HAVE MORE THAN ONE BRAIN CELL,
MAYBE. I do own some silver, clear and free & in my sweaty hands.

gottago
18th December 2009, 00:02
I CAN'T PROVE IT, BUT I'M PRETTY SURE I HAVE MORE THAN ONE BRAIN CELL,
MAYBE. I do own some silver, clear and free & in my sweaty hands.



I've seen that picture somewhere before???

I can has a ride?

LETMYSILVERGO
18th December 2009, 00:37
I've seen that picture somewhere before???

I can has a ride?

THAT'S ONE OF MY VACATION PICTURES, B 4 I FOUND OUT U R NOT ALLOWED TO THUMB IT ANYMORE.-- BASTADS

Katwoman
18th December 2009, 07:12
This may NOT be good news short to medium term PM prices. Sure, the bankster cartel is squirming over covering their shorts, which is probably why they ordered the margins increased, to shake out and reduce the profit margin for the leveraged longs, including hot money technical/momentum traders. Same shady underhanded trick used on the Hunt brothers in 1980...change the rules in the middle of the game.

Don't forget, the banksters' racket is paper and they can get unlimited quantities of freshly-printed/keyed FeRNs, more than needed to cover their margin increase in the tiny precious metals markets. Leveraged longs have to work for or steal their money. Still, with backwardization, this can be viewed as an act of desperation to avoid having to produce real metals that the shorts obviously do not have.

I am "all in" silver long-term and do no short term trading, so am not terribly concerned about the price drop. However, one of my old pals in Sacramento Cali is on his way to Jason Hommel's Rocklin Coin Shop with 20,000 FeRNs, so I would appreciate any advice from our best analysts about whether he should turn his car around and wait until next week, in case there is another shake out of the weak hands.

Nothing has changed. IMHO this pullback is still in a trading range and not going significantly lower than it has been so I do not see new lows being reached. The run up we saw earlier in the week is a prelude to what is coming and the next run up will take us to new highs. It could even happen today.

Steadfast
21st December 2009, 12:44
I hope your right Kat...
My pastor just decided to buy into Silver for the first time today...

By my advice...

It would not be good if he gets discouraged just before silver goes super nova.!

nepenthean
18th December 2010, 16:07
All this talk about a margin increase, but no one can list figures?


edit: $10,463 $7,750


http://www.cmegroup.com/wrappedpages/clearing/pbrates/performancebond.html?group=METALS&type=OutrightRates&h=2&reporttype=marginrate

Anyone know why the same tier SI contract has different margins listed?

Jack
18th December 2010, 17:26
We all assume that naked shorts will have to be covered. I do not believe this is necessarily true. Is there any way to verify when shorts are covered, and for what amount? I'm talking about JPM, of course. My guess is that naked shorting will continue without margin calls no matter what the price until the day force majeure is declared, and all the paper long profits will be wiped out. Then the price of physical will truly lift off. As for mining shares, now is a good time to revisit Atlas Shrugged and the fate of Francisco D' Anconia's copper mines.

Matthew Shelley
20th December 2010, 09:14
We all assume that naked shorts will have to be covered. I do not believe this is necessarily true. Is there any way to verify when shorts are covered, and for what amount? I'm talking about JPM, of course. My guess is that naked shorting will continue without margin calls no matter what the price until the day force majeure is declared, and all the paper long profits will be wiped out. Then the price of physical will truly lift off. As for mining shares, now is a good time to revisit Atlas Shrugged and the fate of Francisco D' Anconia's copper mines.

A metals force majeure? Has this country run out of rail cars?

Matthew C. Shelley
Commodity Broker

As always: Trading in futures and options is very high risk investing. You can lose all or more of the money you invest. Only risk capital should be used.

Jack
20th December 2010, 10:28
In paper, yes, not metal. Think it can't happen? Remember what the bankers told congress prior to the bailout. It was followed by "or else."

Matthew Shelley
20th December 2010, 14:13
Didn't the increased margin requirements in silver, together with the enforcement of execution-only trading, bankrupt the Hunt brothers in 1980? (I was 3 at the time, so I have to ask)
If position limits are set now, can they choose the execution-only route again?? That would probably have a negative effect on the silver price, since existing contracts cannot be rolled over and have to be closed at expiration.

The Hunt brothers lying to the exchange about their positions being bona-fide hedges and getting caught and forced into liquidation was their downfall.

Matthew C. Shelley
Commodity Broker

As always: Trading in futures and options is very high risk investing. You can lose all or more of the money you invest. Only risk capital should be used.

beach miner
20th December 2010, 15:23
Hasn't JPM called his giant Short holding a Hedge and the SEC agreed. The Market looks more like a Casino run buy Market Lawyers than the Mob. The Whole Market is beginning to Stink. TARP money used to buy Stocks to Boost the Market----Only the CHOSEN FEW recieved OUR CHILDREN'S future wealth. The American Tax Payer is being Enslaved buy Wall Street and Washington. Truly--Ownership of Gold and Silver (especially Silver) is the only way to preserve and enhance your weatlh. See You At The Top. Because we are beginning to see the Bottom.

orlando_wrx
20th December 2010, 15:34
There are plenty of big buyers in silver from here on out as far as I can see. The only way the market can bring silver prices down for an extended period is if enough people stop buying physical silver so that their lack of real supply is never brought to light. It's only a matter of time until a default. I feel confident that market determined prices are already way lower than physical "should be", and so do many others. The markets have placed a value on paper silver, these prices don't necessarily reflect the value that physical owners/buyers place on silver. Just before the paper game is over you will probably see a very large DROP in price for a small amount of time while insiders are getting the hell out of paper...this doesn't correspond to the actual value of physical...trust and faith in the market is an acting force on the markets valuation of the item.