Week 29.1 CME Margin Raise for gold
Last week CME did a margin raise of 22% for gold contract. Now let us look at the margin for gold and silver.
Silver contract initial margin is USD21600/-, price at USD40/oz x 5000oz = USD200,000
21600/200,000 = 10.8% margin.
If you raise the margin some more, people may just as well buy physically directly.
Those who liquidate earlier are weak one, now those remaining long are very strong, it will be difficult to liquidate them. I don’t think the margin can be raise much more. If they raise the margin, price will drop a bit, then the long will buy/sapu all the physical at cheaper price. It is a catch 22. It’s a very difficult position for JPMorgan and HSBC who are still holding a large position of short.
21600/200,000 = 10.8% margin.
If you raise the margin some more, people may just as well buy physically directly.
Those who liquidate earlier are weak one, now those remaining long are very strong, it will be difficult to liquidate them. I don’t think the margin can be raise much more. If they raise the margin, price will drop a bit, then the long will buy/sapu all the physical at cheaper price. It is a catch 22. It’s a very difficult position for JPMorgan and HSBC who are still holding a large position of short.
For gold the initial margin is USD7425/- contract 100 oz price at USD1800.
7425/ (100 x 1800) = 4.125% margin.
7425/ (100 x 1800) = 4.125% margin.
Thus there is still a lot of room for margin raise. Perhaps, margin raise might be done closer to 20th of August onwards if price still around USD1730++ and there is a delivery at end of august. Just a wild guess.
Other technical indicators
Based on last closing day 12th August 2011.
If you look at the RSI-14, it is 71.20 (daily chart) and 79.63 (weekly chart). Thus, gold is over-brought.
If you look at full stochastics, STO the value is 81+, suggest over-brought.
If you look at ADX, it still shows a strong uptrend.
My guess, possible margin raise in August or Sept 2011 to drive the price down. If you are using UOB gold account then it may be possible for you to do some trading buy-sell because the spread is RM2/gram. For other banks it is difficult because the spread is very high 5%-8%. If you plan to buy some physical, then just delay your decision until RSI-14 is < 60. As of now, there is no supply shortage for gold. Most vendor still got lot of gold for sale.
If you lose money, I’m not responsible ok.
gold bulishness is different , these are big players who are strong hoarders like central banks or tycoon , central banks buying cannot be seen here as they done it off market , therefore they are big driving forces.
ReplyDeleteeverytime they bought it, they put a base price - confidence level. When India Central Bank bought 100 tons at 1100/oz, that is their put. Then many followed suit after that, Mexico, Kazakhstan, Sri Lanka, vietnam even recently the most anti gold central banker, SOUTH KOREA also start buying GOLD.
unlike silver, central bankers are not buying silver, YET. Eventually it is everyone's hope they will, then silver price will fly.
gold recent dip of 1800 to 1730 , that is not a meaningful correction at all ... but when prices are low, even you want to buy physical 1 ounce now, uob also no stock .
ReplyDeletewhen play paper can wait low price lah, physical ... how to wait ? there is the picture of supply - demand.
u can order from overseas directly from vendor, but I doubt it is any cheaper, then it may be gone during shipping. not so easy.
a margin raise fear is mitigated by bigger concern of euro debt crisis and US 2nd recession fear, margin raise will not force gold sell-off, my personal prediction gold will march on.
ReplyDeletethere is no financial crisis however because most banks are well capitalised, but there is a huge crisis of confidence towards sovereign debt of America and Europe, that is an even bigger issue than banks' balance sheet.
Dont blame me if you lose money also.
naked short selling ban is hurting european banks, short selling is done more by banks to hedge against counterparties' risk, but the idiotic government again thought market down is caused by short selling by speculators. this is what causes interbank credit freeze in 2008, they are repeating it again.
ReplyDeleteso easy to short sell meh ? try to short sell gold and silver now, you will go broke. there are more risks for short sellers than long investors, it requires wit and being bold.
Malaysia used to be land of gold very very very very long time ago when Malaysia was not founded yet, traders from China and Middle East like to sail here to trade because the Sultanate Kingdom back then pay all trades in dinar emas, gold and we have a lot here.
ReplyDeletetoday it is no longer true, malaysia has very little gold. we settle trade in worthless paper guaranteed by a bankrupt nation, and the ASIAN central bankers have tons of them 70% of FOREX reserves, 300 bn USD in BANK NEGARA is USD. CHINA has 3.2 tn USD in their CENTRAL BANK.
countries which are mining exporting gold may not be allocating less and less gold for investment very soon, they will allocate to their central banks as the US DOLLAR and EURO crash is coming soon. That means there are strong hoarders which are causing a supply squeeze and very soon the GOLD price will go parabolic as people rushing for very scarce supply.
therefore dont worry about chart telling you trade for few weeks to few months, go to get physical as long as selling price is fair. (5% spread, 5% premium from spot)
after all this supply squeeze ? which is next, I am telling you , IT IS SILVER because the public can no longer reach gold as it is priced out of public.
that is of course my personal opinion.
MALAYSIA has 30 tons of GOLD vs VIETNAM 600 tons vs CHINA 1064 tons ... the one less than us is the most anti gold SOUTH KOREA ~11 tons if not mistaken , they also started admitting defeat to their faith in US DOLLAR and started buying recently. MALAYSIA still doing nothing, rather our EPF went to buy 740 mln OFFICE BUILDING in LONDON ... the nation that maybe bankrupt soon.
ReplyDeletedont count on our CENTRAL BANK, they are making slow move ... and are being left behind by the rest of the nations.