Week 30.2 CME Margin Raise 2.
A customer of mine raised lot of questions on the price movement of gold and silver. It’s indirectly forces me to do more work. That’s how I come out with the margin raise on Aug 14 Article.
Basically the margin for gold is still too small to support the market volatility for exchange to bear the lost. Then on 23rd August, SGE (Shanghai Gold Exchange) raised the margin requirement to 12% from 11%.
http://business.financialpost.com/2011/08/23/shanghai-gold-exchange-lifts-margins-for-gold-forwards/
Gold price drop from peak USD1930/- to USD1840/oz in 1 day.
Then on 24th August 2011, CME raised the margin requirement for 100 oz gold from USD7425 to USD9450. 2nd Margin hike. The gold price drop from USD1840/oz to USD1700/oz with-in 1 day.
After, the 2nd Margin hike, margin is still at (USD9450/ 100 x USD1778.50 ) x 100% = 5.31%. It’s still has a long way to go. FYI, Margin for 5000 oz silver contract is 10%.
Had SGE not made the move on 23rd August, price drop will be more painful. I was expecting CME to make the move but did not expect SGE to make the move first.
Let me cut it short, I’m expect a 3rd CME margin raise before 31st August 2011 prior to last delivery date of August gold contract. Price will drop again. I’m expecting gold to drop around USD1650/oz. It’s a good time for them to act as some of the markets are closed for Hari Raya.
It’s still questionable whether you can benefit from it because some banks are closed when the prices are good.
Till then “Selamat Hari Raya”
a margin hike fear is only for paper & margin traders who are swimming naked, physical traders should not worry too much.
ReplyDeleteAfter all, even if it is cheap, the really cheap physical supply is not available at all.
GOLD did drop from 1790 to 1700, unfortunately the US DATA just doesnt take too long to show its ugly side again, and it rebounded within hours to 1770, almost meaningless for a physical trader to be happy about it.
unless u r active traders, else shud nt worry too much.