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CME To Allow Gold As Margin Requirement Collateral
Is JPMorgan in urgent need of gold replenishment? If one reads between the lines of today's surprising announcement out of the CME, that the Chicago exchange will allow the use of gold as collateral for margin requirements (for up to $200 million), with the actual physical gold to be stored at JPM's bank in London, that is one possible explanation. From a Nasdaq press release:
U.S.-based clearing house CME Group Inc. (CME) will allow physical gold to be used as collateral for margin requirements on all exchange products, a spokesman said Monday.
The new global policy is effective Oct. 19 in accordance with a member's notice issued late Friday, said spokesman Jeremy Hughes in London.
Clearing member firms will be allowed to post up to a maximum of $200 million worth of gold as collateral to cover performance bond, or margin, requirements, Hughes said.
The gold will be held at J.P. Morgan Chase & Co.'s (JPM) bank in London.
Recent rumors have speculated that gold could be in a state of severe backwardation, which would explain the dramatic spike in gold prices over the past month. Yet for all discussions over gold's (lack of) value, today's move by the CME is surprising as margin requirement satisfaction has traditionally been relegated to extremely liquid securities (assorted currencies). One wonders if this is merely a way for large banks to begin replenishing their depleted gold coffers (and continue shorting) after repatriation efforts by several key sovereigns in the past quarter. An indication of the validity of this theory would be whether or not other large banks follow in CME's (and JPM's) footsteps and begin "allowing" gold to be pari passu with the dollar (settling quite a few bets whether gold is in fact money).
h/t Ryan
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JP Morgan Chase is setting up for the most massive gold short squeeze in history. It's going to be horrible. Banks are going to close, exchanges are going to close, accountants are going to feel like idiots for counting meaninglessness their entire unlogical life.
Or, a more believable reality, JPM will somehow come out of it again as gold craters due to - something.
Or, after getting people to post gold as collateral for other paper products, the banks then tank said products and JPM et al get to keep the gold.
Theft in plain sight. Margin call, gentlemen!
You have it. But I would add that anyone dumb enough to give up their physical gold in this manner deserves to lose it.
Exactly...I was thinking the same thing. Sure they will "accept" it as collateral, but who will be stupid enough to post it? With the US Govt. treating hedge funds on par with organized crime now, any hedge fund manager who has made good coin up until this point is better off taking their Gold/money and getting the hell out of USA than post "margin collaterals" with the CME.
Moi aussi. The whole purpose for owning physical is to keep it out of their paws.
Christ: I blew the math problem!
yes, a beautiful plan, and i believe 100% that is how they will play it
+100000 for you sir for being a brilliant observer ....
Yes but how long will that last. Those margin calls are going to cause alot more smoke and fire and fear and real reaction by people than all the quietly running cash for gold commercials every 30 minutes on ever tv station in the US. Smells desperate to me but I have to agree you just nailed the motivations behind it.
Most logical conclusion, keen insight.
Not only will they now allow gold as collateral, they must have and need gold - there is a run on gold and they have been on the wrong side of it.
Barricks equity offering to get themselves out of their downside gold protection hedges (puts), US dollar weakness, foreign governments demanding their physical gold from NY and London vaults, hedge fund and mutual fund titans storing physical gold, China stockpiling gold and asking their citizens to do the same, the mint is out of blanks for coins, rumors of exchange delivery problems (surprise requests for delivery and not just trading), and now JPM needs more gold to securitize. You might want to read the fine print when considering giving gold to JPM, when you can have it sent back to you, who really owns it while being stored at JPM - it will be leased/loaned out to roughly 80 other entities (estimated number of paper certs for every gold bar).
Gentlemen - It has been time to long gold for the last decade, but time is short to continue purchasing gold at a discount due to price suppression. The time may be now to short paper as well. Please take a look at this article in Rolling Stone magazine, another great from Matt T. http://www.rollingstone.com/politics/story/30481512/wall_streets_naked_s...
Note that the last time he published an article on Goldman Sachs it encouraged politicians to investigate, the Wall Street Journal to actually do an investigative piece following the Rolling Stones lead?, and generated calls to curb illegal activities. This article mentions that naked short selling is taking place in commodities, precious metals, bonds, and equities. If they were to introduce new rules preventing gold shorting without the actual underlying gold (or gold being used for collateral, say in a JPM margin account), GOLD WILL EXPLODE!
Of all of those, the Barrick announcement was the watershed event. All of us gold bugs can rant all we want, and the big players who think they're smarter than us and have better information than us will ignore us, call us tinfoilers, etc. But I think the Barrick annoucement hit them like a ton of bricks. Major gold producer with inside connections gives up on shorting the gold market? Time to change sides.
Sounds like a plan to me.
"JP Morgan Chase is setting up for the most massive gold short squeeze in history. It's going to be horrible"
LOL. I'm laughing my ass off
Why do you have alot of tungsten for sale on ebay?
Betting on whether gold is in fact money is like betting on whether or not the sun radiates heat.
Hey look, there's some physical holdings for GLD. Now all the tinhats have nothing to chirp about.
"Does anyone have any gold they'd like to lend?"
I wonder what the deposit agreements look like. It's obvious the system is starved for physical gold. For those of you still in the fiat camp, the learning curve is steep here. For those of you (us) in the gold camp, got popcorn?
Edit: Near-term crunch time might turn out to be December '09 contract delivery, or lack thereof. OI figures here:
http://www.nymex.com/gol_fut_csf.aspx
I've got a truckload of popcorn that I have already started dipping into generously.
BTW, whoever posts Gold as margin collateral is an utter idiot as they will likely never see it again, not in the least because it will be in the custody of THE most corrupt and criminal bank in the world - JP Morgan. It would make more sense for them declare bankruptcy and hide their gold than post it as collateral at this point. On another note, shouldn't JPM be hoarding dollars instead since it is about to rise megalomaniacally, which JPM can then use to buy Gold at rock bottom prices...wait...can somebody PLEASE find Robert Prechter?
"wait...can somebody PLEASE find Robert Prechter?"
I think he is having a beer with Obama nad John Nadler.
I'm looking at the futures board for gold. No backwardation.
oops, I guess the 25% over spot news might be on the money(or on the gold for that matter)after all. Let us see how they gonna get out of this one.And what was the tonnege amount?does anybody remeber?
Fuck the banks and their gold deposits, i get my gold from Romanian gypsies. 95%+ purity for half a price of the price listed on the exchange. fuck you very much JPM.
dont ask dont tell policy
but they get like 10+ kilos of the stuff when they get married, and they always sell at least 20% of the gift so they have some cash at hand, but yes, some of it is hot. i used to buy my gold directly from a private mint which owner i know for years, but when i discovered the gypsies i started to buying it from them. And they are the most honest of all the people i have done business with.
There is already a shortage and this is going to blow up in the faces of the banks who are short gold and silver. Just look at the COT reports and you'll see that the commercial short positions relative to the actual supplies of these metals will make for an interesting COMEX explosion. Can't wait.
If you do not have possession of your physical metal, you will likely be screwed.
But i do, that is the beauty part of the whole thing. I dont do complicated markets, i am old school when it comes to this. Hence, the gypsies.
Cheeky, I am going to find you...then find your gold.
are you Chumbawamba
If he's NOT Chumbawamba...
He's GONE Chumbawamba!
The gypsies are perhaps more trustworthy than the House of Morgan.
Oh Cheeks, I see you are able to bounce back after Jenson Button.
yeah, fucking button, hope he scores 0 points next year and that rubens takes the title with williams.
and yes, gypsies are honest as hell, conniving little bastards, but honest.
thats why i like the, and why i usually go to their parties. their music rocks.
"thats why i like the, and why i usually go to their parties. their music rocks."
Cheeky = Wonderlust King!
'their music rocks'
+10
Gold is the most immutable substance on earth. All gold in existance has probably been stolen a dozen times throughout recorded history. If you didn't dig it yourself then it's been stolen at least once. LOL
Cheeky, the more you post, the more I am becoming convinced that you are inspiration for the "The Most Interesting Man In The World" ad campaign that Dos Equis is running in the states.
Buying gold from gypsies...hands down the most awesomest thing I've read all morning (grammatical evisceration 100% intentional on my part.)
*blush**snorts coke*
"I don't always buy gold. But when I do, I buy it from gypsies. Stay solvent, my friends."
Nice
Classic.
And if he's most interesting man in the world, then why is he drinking Dos Equis in the first place?
i dont, i drink petrol with the occasional shot of kerosene ...... and Martini
http://online.wsj.com/article/SB2000142405274870411290457447727248398141...
So, when "The Most Interesting Man in the World" says, "Find out what it is in life that you don't do well, and then don't do that thing," then why doesn't he trade in his Dos Equis for some Red Stripe?
http://www.youtube.com/watch?v=xYIos4qdmlM
http://www.youtube.com/watch?v=d7tRCfSuMTY
They are dreaming,righ?it dosn't look like anybody(from what I read)is willing to part with their gold(not to mention entrusting a bank with it),lol............
Let's see. I could meet my margin call with worthless dollars or with gold. They want my gold. Hmmmmmm. That was easy. Dollars it is!
Fuck you, Bernanke.
China got "good delivery" bars from London with Tungsten core.
The link came via hartgeld.com, look at the second part.
http://harveyorgan.blogspot.com/2009/10/oct-1709-commentaryimportant.html
Aha! So maybe this is a deal by which the Asians can bank their bogus gold bars at full price at the CME in exchange for Tbond delivery? Hahahaha. Who will the CME pass the bad bars on to?
Gresham's law will come into play. Bad money (bogus bars) will drive out good money (contract fulfillment bars.)
So are you telling me that in this "advanced" age a "sophisticated" operation like the CME will accept a "barbarous relic" like Gold as margin collateral and a "sophisticated" bank like JP Morgan will find it acceptable to be bothered with holding it?
yes, the savages, the whole lot ...
this is the game plan
1. crash the market
2. devalue the dollar
3. appriciate gold
4. stage a big ramp in the market to tease in the sheeple
5. keep devaluing the dollar in order to [ see 4 ]
6. give out the option to have gold as margin collateral
7. keep 5,2 and 4 in order to
8.get as much gold as possible
9. crash the market, take gold
10. kill the dollar
11. price gold in SDRs
12. sell gold back to the sheeple with a 200% premium
repeat the process again in 50-80 year time
How the government(s) will take your gold away:
Pass their own version of tax the rich Value Added Tax. Anyone buying luxury cars, boats, houses, furs, etc. (super rich) pays an 85% VAT to the government on top of the purchase price. Add gold to the list - tax it at 200%! All prudent savers, investors who have been getting prepared for failure of fiat money system are suddenly screwed - if they try to trade their gold for food or bartered goods the govt. is there to dramatically reduce the purchasing power of the metal.
Yeah - that will go over without a peep.
It's like a complicated version of the 30's because well they got their ass caught in the 30's. LOL
I dub the process "The FDR Cycle".
Get enough gold as margin, then tank the assets they guarantee, then take all the gold. Nice.
Just don't let them take your FRN's, LOL.
On a side note, interesting that most gold & silver miners are down today in a big up market and with gold gaining.
They couldn't hammer Gold down so they are taking it out on the equities...lol...or perhaps physical bullion in hand is worth a lot more than Gold in the ground right now. Like they say - a bird in hand is worth two in the bush.
They are doing it through naked shorting, perhaps someone might strip them naked and make them shorter.
http://www.rollingstone.com/politics/story/30481512/wall_streets_naked_s...
They actually are doing it through naked shorting. Go to failstodeliver.com and check out GDX. Interesting spike in the fails data as of late.
It's a free gold lease as far as I can tell. Get a bunch of gold you don't have to pay for, lend it into the market and worry about it later. I agree that it would give incentive to have increased volatility to keep the posted margins.
I wonder if they can give cash back to those who post gold as collateral? Wouldn't that be a neat trick???
This is another phase of the gummits efforts to recapitalize the securities industry. Last time, under the cover of "unfreezing credit", the gummit gave them TARP money to buy beat-down securities cheap. As intended, this set off another run-up.
The banks then sold their cheap securities into this run-up to raise cash. Would be illegal manipulation if the gummit were not complicit. Where do you think all this bonus money is coming from?
Arguably, the big guys are still way undercapitalized. So they intend to do the same thing all over again-- crash the market, buy up depressed securities, and then sell them on the run-up.
But this go-round, they also take bullion as margin collateral. Then, when the gold-collateralized margined stocks crash, they get to cover their naked gold shorts too.
There is only ONE plausible explanation. JP Morgan needs access to physical gold and they are unable or unwilling to acquire the physical stuff in the open market. Either there is no physical gold available in the size JP Morgan wants or it is unwilling to pay what the market demands in the open market.
Either way JP Morgan, your time is almost UP!!!!!!
Amazing, why post gold when you can post Dollars during devaluation? I'll just assume no one with 200 million who trades is stupid enough to take up this offer.
As a wise money manager said to me last week: "Gold is only useful when you keep it off-grid, totally outside the clutches the system."
Too right.
Anyway I just find this hilarious.
1790s
oops! 1690s of course
It is interesting that this does not include silver.
This leads me to believe the future currency of SDRs will include gold.
This may be a plot to get fake gold into the system because they can't cover their physical need, and need someone else to blame it on (plausible deniability): http://harveyorgan.blogspot.com/2009/10/oct-1709-commentaryimportant.html
If you are dumb enough to put gold up as collateral, JPM and the rest could simply naked short the shares you are in (they know which shares you own) and collect the gold as collateral. They can short the shares without putting up collateral and delivering. Read Matt T's latest: http://www.rollingstone.com/politics/story/30481512/wall_streets_naked_s...
When it comes time to get your gold back, do you get the weight in gold, or the dollar value in gold that you deposited? That is the question.
I was recently hired by the DHS "cyber eyes" program, and we want to thank you for making our job of locating the myriad metal stashes throughout the world so much easier. Happy blogging.
the gov't and its agents are going to fleece as much gold out of the cracks any way possible
they will be a lot more sophisticated than Roosevelt; the best way is to crash markets and create a famine
the leverage of physical gold for agents (FED members) is astronomical
they need to stop the flow of gold to Asia, Russia, Arabia et al and probably will get some wars going; right now the next target is probably Pakistan
I hope one of you won't mind answering a question from a newbie. Why would JPM hold the gold in London vs New York? And, as Apoc Now wrote, why do you think they didn't include silver in this collateral arrangement?
99% of the OTC [over the counter] gold market clears in London with the major vault players being HSBC JPM and Bank of England
Silver is much less liquid, but it is a good question [as opposed to a majority of the rubbish ive been reading in the comments].The ETF has proven quite popular [current holdings in excess of 22 mio oz, perhaps silver will be accepted in the future, but at a guess I would say not <-- if you think about it, the notional value is so much less than gold that it may become impractical to post as margin.
Does anyone know if you can use gold as collateral to trade/invest in stocks?