This page has been archived and commenting is disabled.

CME Lowers Gold Margin By 9%

Tyler Durden's picture


Adding to the confusion, for some, that is today's trading session, here comes the CME which in a post-closing announcement, proceeds to hike outright margins on a variety of petroleum and freight products, but more importantly just cut the margins on gold by 9%. Is it that time when the establishment is clearing the path for everyone to rotate out of equities (and/or bonds) into gold, just to set the trap and pull the trapdoor once everyone is once again left holding paper gold? We shall see, but following tonight's selloff, gold is now less than 5% less than stocks YTD. It may well be up to the last trading session of the year to determine who wins in 2012: rock or paper.

Source: CME


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 12/28/2012 - 18:09 | 3103205 negative rates
negative rates's picture

Just wait for that tungstun to hit the streets big time. Bubblalishous

Fri, 12/28/2012 - 18:57 | 3103383 ACP
ACP's picture

Rock or paper? I say the Bernank's NECK.

Fri, 12/28/2012 - 19:01 | 3103392 strannick
strannick's picture

The CME lowers gold margins while Shanghai rises them. The difference is of course that in Shanghai you get gold, while at COMEX you get earnest assurances from Jeffrey Christian and Bart Chilton.

Sat, 12/29/2012 - 08:15 | 3104352 GetZeeGold
GetZeeGold's picture



Don't count your chickens....until you actually take delivery.


There is a reason drinks are free at the casino....they don't want you to actually take your chips and leave.

Sat, 12/29/2012 - 09:15 | 3104407 This just in
This just in's picture

Chacken and chips.  FUck you, now I'm hungry!

Sat, 12/29/2012 - 09:47 | 3104425 GetZeeGold
GetZeeGold's picture



Good thing I didn't reference watermelon.....probably would have got my ass smoked for that.

Fri, 12/28/2012 - 19:29 | 3103516 Silver Garbage Man
Silver Garbage Man's picture

I don't care who wins 2012....I know who is going to win the ultimate championship .....SILVER and GOLD.

Fri, 12/28/2012 - 19:40 | 3103569 ball-and-chain
ball-and-chain's picture

There's no way I'd buy a gold ETF.

I don't trust these people.

They get to commit crime in broad daylight and continue to walk the streets.

The mattress is the best place for my money.

Fri, 12/28/2012 - 19:47 | 3103588 DoChenRollingBearing
DoChenRollingBearing's picture

Physical cash and physical gold is not a bad strategy.  It is easy to explain as well.

Fri, 12/28/2012 - 18:10 | 3103208 Killuminati
Killuminati's picture

need more reason why gold is gonig to crash? trying to get the little guy in. 

Fri, 12/28/2012 - 18:14 | 3103223 sitenine
sitenine's picture

Right. Because the little guy is buying on margin... idiot.

Fri, 12/28/2012 - 18:18 | 3103237 kliguy38
kliguy38's picture

correct....the game is to drag in some of the hedge funds into the next fire zone. There is a desperate need to hold the price inside a range and without some weak hands getting on board they cannot pull it off. Its always about the weak hands and the paper trade is just about destroyed the suckers. gl

Fri, 12/28/2012 - 19:13 | 3103437 sessinpo
sessinpo's picture


This is the CME, that means futures, commodities trading. WHO isn't buying on margin?

If you had any actual knowledge on trading, EVERYONE is on margin - even the big finanicial firms. The is the enticement of this business - that is the business model.

You have HIGH leverage BECAUSE you are have very little upfront cost to control large amounts (contracts). That also means HIGH risk.


Fri, 12/28/2012 - 23:42 | 3103701 sitenine
sitenine's picture

No shit (kliguy38 made the same point above your comment an hour earlier btw), but thanks anyway - not that I really even care. I'm not a trader, wouldn't be a trader, and wouldn't befriend a trader. Traders are just tools with a license - most of them are phone monkeys. All this means is that paper prices will go up based on the pumped up liquidity in the sector translating into a higher spot on phyz, so: 1. buy more physical over the weekend when no 'trading' is going on 2. watch the spot rise moderately as the ES shrinks next week 3. patiently wait for another buying opportunity 4. rinse and repeat for as long as the system holds together. Beyond that, how many 'little guys' out here really care what the margin is?

[edit] I suppose I should add this disclaimer: This comment is just one idiot's opinion. I am not offering you advice!

Fri, 12/28/2012 - 18:19 | 3103241 bidaskspread
bidaskspread's picture

Because Jim Cramer recommended it in yesterday's show.

Fri, 12/28/2012 - 18:21 | 3103247 agent default
agent default's picture

It's the little guy buying gold and silver coins that is screwing them bozo.  He cannot enter the paper market anyway. 

Fri, 12/28/2012 - 19:10 | 3103444 Frozen IcQb
Frozen IcQb's picture

That makes sense but only in theory.

The little guy doesn’t even know what gold is other than jewelry sold for cash at pawn shops.

Fri, 12/28/2012 - 20:03 | 3103659 logicalman
logicalman's picture

This little guy does, and has for a long time.

Well hidden Phys is the best!

Fri, 12/28/2012 - 23:34 | 3104102 WTFUD
WTFUD's picture

. . . the little guy is the UK banks. .

Fri, 12/28/2012 - 18:12 | 3103212 TheSilverJournal
TheSilverJournal's picture

How long until the paper gold door slams? $5,000? $200 oil? $300 silver? $10 milk?

Fri, 12/28/2012 - 18:47 | 3103348 Papasmurf
Papasmurf's picture

$10 milk happens first.  

Fri, 12/28/2012 - 20:04 | 3103663 logicalman
logicalman's picture

Milk is not a good long term investment.

Cheese is different.

Fri, 12/28/2012 - 21:50 | 3103898 This just in
This just in's picture

cheese is a derivative of the milk carry trade.


But if you hold the teet, you get a dividend.

Sat, 12/29/2012 - 15:15 | 3104890 Theosebes Goodfellow
Theosebes Goodfellow's picture

$10 milk, (well, $8 anyway), sooner than you think:


Fri, 12/28/2012 - 19:14 | 3103456 CPL
CPL's picture

Come to Canada...gas is cheaper than milk.

Fri, 12/28/2012 - 21:51 | 3103901 This just in
This just in's picture

If milk gives you gas, then it's way cheaper.

Fri, 12/28/2012 - 23:04 | 3104051 Intoxicologist
Intoxicologist's picture

And beer is cheaper than gas.

Drink! Don't drive.


Fri, 12/28/2012 - 19:36 | 3103552 auric1234
auric1234's picture

The lower it is, the more dangerous to their ponzi because physical buyers take the opportunity.

So yes, please keep smashing paper gold down.


Fri, 12/28/2012 - 18:20 | 3103215 TraderTimm
TraderTimm's picture

CME needs more muppets for the next paper trading gold smackdown.

Also, looks like CME is getting more desperate regarding their trading volumes. They're running a deal with a data provider Kinetick, to provide certain CME quote feeds for free.

I don't work for either organization, in case you want to know - I just think its amusing they're having a firesale on quote data, which is one of their primary income flows.

From the Kinetick FAQ:

Q: Why is this being offered?

A: The CME Group is interested in generating trade revenue. They understand that making data, news and tools available to traders will help drive volume on the exchange.

(Emphasis mine.)

Couldn't happen to a better group of people, eh?


Fri, 12/28/2012 - 23:40 | 3104107 WTFUD
WTFUD's picture

CME = Coke Meth Exchange

Sat, 12/29/2012 - 11:36 | 3104489 cbaba
cbaba's picture

Trader tim, excellent point, but i would say Yes and No.

Yes, It is Correct that CME is getting more desperate regarding their trade volumes. But, generating trade revenue is the noble cause, not the real cause.. The real cause is the suppression of Gold and Silver price but they will never disclose this truth in public..

If the trade volume drops, the whole rigged game will be exposed, they will loose control of this game of suppressing physical price of gold thru paper gold. The trade will go to somewhere else ( London, shanghai, spot etc.) and there will be more and more difference between the paper and spot price of gold until the whole paper control business explodes and physical gold price skyrockets. 

Remember when the Nixon closed the gold backing by gold in 1971 its the same year this CME is established. They are not there to make money, their only purpose of existence is to control the price of gold ( and silver).

They are very powerful, they have their backing by the biggest us banks, fed, us government, they have all the money they can burn, they can change the rules, they may even declare Force Majeure and not deliver you the promised physical if you decide to take a delivery at the end of your future contract but they have one weak spot, the Volume...




Sun, 12/30/2012 - 06:12 | 3106150 Pegasus Muse
Pegasus Muse's picture

CFTC Whistleblower & Independent London Metals Trader Andrew Maguire has over 40 years experience as a metals trader had some interesting comments on silver in a recent interview on KingWorldNews:


Maguire also added: “One of the things I wanted to talk to you about today was something I saw in Shanghai early this morning. Eric, I had to double-check, in fact I had to triple-check. We’re talking about the kind of divergence (in the physical market) now that’s unprecedented.

Today I looked at the opening premiums and there was a $2.89 disparity in silver. I’m not talking gold. When spot silver was trading in London at $29.61, silver actually traded at $32.50 (in Shanghai).

If you take an equivalent Comex contract, and I realize spot isn’t Comex, but if you take an equivalent 5,000 ounce Comex contract, that equates to a $14,430 premium per contract. I mean it’s ludicrous. There are reasons why you may or may not have a premium in Shanghai, but not to that extreme.

Shanghai (softened but) still closed at a $6,100 premium to equivalent Comex contracts. So what we’re saying here is that the divergence has now become ridiculous. I mean these high and low closing premiums literally illustrate the massive divergence between the paper market (and the physical market).

And, Eric, this is on an exchange (Shanghai) that within the next two years is actually going to become the world hub of physical gold and silver trading. It’s going to have its own fixes. So I think they (the manipulators) really pushed it a little too far today.

You’ve (also) got the short-selling algorithms, and they have absolutely no or little if any input relating to the physical market. So if this price turns against them, they are not going to understand why it has turned. They won’t understand the fact that central banks have been buying 6, 12, 20 (tons of gold), and I still haven’t even got the numbers for today, but there was very large physical take-up (today as well).

So when it (price) turns, they are not going to understand what’s happened, they will just follow it. But the concern to the bullion banks (here) is they are fully aware of the physical drain, and I absolutely guarantee you that they are going long on this final stage of the selloff.

Price up to now has really been assisted by (US) government defense of the dollar in the over-the-counter FX gold markets, but the central banks (out of the East) and the bullion banks are (now) jointly buying this discount.

Part 1:

Part 2:

Fri, 12/28/2012 - 18:12 | 3103217 DoChenRollingBearing
DoChenRollingBearing's picture

Bastids!  It's a trick!

Raise the margin to 100%!  Do it now!  Physical only!

Fri, 12/28/2012 - 18:27 | 3103276 e_goldstein
e_goldstein's picture

but, but if they do that, then there can't be any moar price manipulation, I mean discovery.


Fri, 12/28/2012 - 18:38 | 3103309 DoChenRollingBearing
DoChenRollingBearing's picture

We'll live...


Fri, 12/28/2012 - 19:28 | 3103507 Sudden Debt
Sudden Debt's picture

bought gld yesterday morning and while gld is down, my options rose 17% today.

volume is dropping and people will buy.
Sometimes it's good to play along as long as your the first one out.

and yes :) I'll buy the real stuff with the profits :)

Fri, 12/28/2012 - 19:32 | 3103533 DoChenRollingBearing
DoChenRollingBearing's picture

Good for you, Sudden Debt!  The Bearing was NEVER able to trade with success, and so declines to play in that casino.  Physical only.


Weird..., your (avatar) arms were not flapping until I greened you, weird...  Must be a conspiracy...

Fri, 12/28/2012 - 21:54 | 3103913 lasvegaspersona
lasvegaspersona's picture


I down arrowed you just to see if I could make your arms stop moving (see Bearings comment)....they are still flapping.

Sat, 12/29/2012 - 15:21 | 3104901 Theosebes Goodfellow
Theosebes Goodfellow's picture

I don't know what's wrong with you, DoChen or you, LVP, but SD's arms always flap for me.


Sat, 12/29/2012 - 00:06 | 3104145 WTFUD
WTFUD's picture

. . . lent out one of my ounce gold Oz nuggets to my dope dealer who promptly did a runner. . . . am sober now. .

Sat, 12/29/2012 - 06:40 | 3104344 Global Hunter
Global Hunter's picture

Down vote for being sober

Sat, 12/29/2012 - 12:20 | 3104536 mvsjcl
mvsjcl's picture

Further down vote for adding to the gold lease scam.

Fri, 12/28/2012 - 18:25 | 3103229 The Gooch
The Gooch's picture

I offer minimally destructive testing with WEDM .

"If you can't see it, you don't own it.


And BTFD. Whatever that may be.

Fri, 12/28/2012 - 18:18 | 3103236 agent default
agent default's picture

They are becoming irrelevant and they have finally noticed it.  Too late.

Fri, 12/28/2012 - 18:19 | 3103240 fonzannoon
fonzannoon's picture

Yes yes paper gold....on margin....yes have some.

Fri, 12/28/2012 - 18:28 | 3103279 ThirdWorldDude
ThirdWorldDude's picture

The chocolate is on the house...

Fri, 12/28/2012 - 18:20 | 3103246 Frozen IcQb
Frozen IcQb's picture

Oh Please! Here we go again....

They must get that last day trader in Albuquerque

Fri, 12/28/2012 - 18:22 | 3103258 The Gooch
The Gooch's picture

Kevin was spotted at a meth house!

Fri, 12/28/2012 - 18:27 | 3103251 francis_sawyer
francis_sawyer's picture

Joobankers need to set the trap for a year end paper smackdown so they can spend their joobuck bonuses on physical... It's as simple as that... Pretty much the same thing happened last year at year end...

Of course ~ I'll get some JUNKS for that comment because there are some smart people with PhD's out there who will ASSURE you that markets aren't manipulated... This is absolutely NORMAL... & that francis_sawyer is delusional... [even though francis_sawyer has never set any traps, nor stolen money from anyone]...

Fri, 12/28/2012 - 18:43 | 3103326 A. Magnus
A. Magnus's picture

I junked you for trotting out the Hitler rhetoric about 'joobankers.' Of all the losers you could pick for a role model, that calls into question ALL of your subsequent analyses...

Fri, 12/28/2012 - 18:44 | 3103340 DoChenRollingBearing
DoChenRollingBearing's picture

francis_sawyer and the rest of us can just feel a WHOLE LOT BETTER ABOUT THE WHOLE DAMN DEAL by buying and holding physical gold.  Don't be a victim of manipulation -- by anyone!

Paper gold is a mirage and a trap!

Of course there are PhDs out there who will also call a stupid Bearing delusional...

Fri, 12/28/2012 - 23:54 | 3104131 WTFUD
WTFUD's picture

Any dumbfuck owning Paper G deserves to be fucked; Along with the " round up the usual dignateries " they are fucking US by assisting in maintaing the dellusion.

Fri, 12/28/2012 - 18:22 | 3103253 tawse57
tawse57's picture

Surely cutting the margins is a way of trying to get more people to buy gold? Which kind of suggests that they are desperate to prop up the price of gold?

Surely the biggest gold bulls need to pause for thought here.

Fri, 12/28/2012 - 18:43 | 3103335 Solarman
Solarman's picture

Actually, they need open interest.  With short interest high and open interest falling they run the risk of getting squeezed.

Fri, 12/28/2012 - 18:24 | 3103263 seek
seek's picture

Yup, it's a trap.

I think this is also part of their effort to walk the price of gold down/build some dry powered on their end so they can knock it down when they need to.

It's no accident this got announced after OpEx and not before. Remember back in Aug/Sept of 2011 they raised margins multiple times ahead of OpEx as the gold price increased to knock it down, but they're happy to wait until after OpEx before a move that would raise it.

I gladly await the day there's a digital crater where CME's account balances used to be.

Fri, 12/28/2012 - 18:41 | 3103323 swissaustrian
swissaustrian's picture


Tonight's COT data should be very interesting indeed. It doesn't cover yesterday but I guess that positions were already in place for opex on Tuesday.

The last week (Tuesday to Tuesday) probably flushed out a ton of long specs. The really interesting part is now whether commercials reduced their short positions significantly.


Fri, 12/28/2012 - 18:49 | 3103359 DoChenRollingBearing
DoChenRollingBearing's picture

+ 1 to seek & swiss


The Central Bank of DoChenRollingBearing does not hold paper.  And has been burned too many times in trading that it no longer does.

Gold will do very well once all of us owners of physical gold decline to sell...

Fri, 12/28/2012 - 18:24 | 3103264 NOPOMO
NOPOMO's picture

I think we are out of GLD & SLV Paper suckers. 

Rock always wins against paper.

Fri, 12/28/2012 - 18:26 | 3103274 The Gooch
The Gooch's picture

Rochambeau, defined.

Thank you.

Fri, 12/28/2012 - 18:25 | 3103269 Smuckers
Smuckers's picture

Get everybody in the pool, smash it hard one more time, mop up the blood, and then settle everyone else at the smashed price when the Comex folds.

Stack on the smack!


Fri, 12/28/2012 - 18:26 | 3103272 swissaustrian
swissaustrian's picture

The physical market in London is drying up, short term forward rates (GOFO) hit yearly lows today:

Longer term rates have also fallen but not that heavy:

1m / 2m / 3m / 6m / 1y
18-Dec-12    0.34200    0.36600    0.39400    0.46000    0.49200                                       
19-Dec-12    0.34800    0.36800    0.39600    0.45800    0.49200                                       
20-Dec-12    0.34600    0.36400    0.38800    0.45000    0.49000                                       
21-Dec-12    0.32333    0.36000    0.38833    0.44667    0.48167                                       
24-Dec-12    0.32200    0.34600    0.37800    0.43600    0.48400                                       
27-Dec-12    0.30600    0.33200    0.35800    0.42800    0.47400                                       
28-Dec-12    0.28400    0.32000    0.34600    0.42400    0.47400

What this probably means:
Somebody is buying the dip. And the "sellers" are leasing the gold on a short term basis, ie mainly 1-2 months.

Fri, 12/28/2012 - 18:50 | 3103364 seek
seek's picture

Check out the shift in silver lease rates over the past two months. All the short terms went from very negative to essentially zero.

Fri, 12/28/2012 - 18:27 | 3103277 Seasmoke
Seasmoke's picture

Patrick Starfish always picks paper.

Fri, 12/28/2012 - 18:27 | 3103278 NOPOMO
NOPOMO's picture

One would think the precious metals should fly with the "Fiscal Cliff".  Apparently not, too many games by the CB & FED has reduced metals to nothing more than sediment.

Fri, 12/28/2012 - 18:32 | 3103289 swissaustrian
swissaustrian's picture

Fiscal cliff effect on pms

Pros: uncertainty, prosect of increased easig

Cons: deficit reduction and disinflationary tendencies causing less negative interest rates. Deficits are one of the key drivers of gold performance.

Fri, 12/28/2012 - 19:32 | 3103531 tallen
tallen's picture

Pros: Debt Downgrade.

Remember what happened last time when the US got downgraded to gold?

Fri, 12/28/2012 - 18:29 | 3103280 rehypothecator
rehypothecator's picture

Rock of paper?  Feh.  I'm going with scissors - surgical devices.  

Fri, 12/28/2012 - 18:30 | 3103281 knukles
knukles's picture

Uh huh
Makes all the sense in the world, on a Friday, December 28....

(humming, staring aimlessly, picking toe nails thinking about meatball sandwich)

Fri, 12/28/2012 - 18:45 | 3103317 Flounder
Flounder's picture

Hang onto your hat Maggie,  they just opened the door to let the vacuum in.  Look at that failed breakout forming on the EURUSD weekly.  Its lead boots for the pair unless someone finds a way to float lead.  Does someone have a plan?

Fri, 12/28/2012 - 18:51 | 3103355 UnRealized Reality
UnRealized Reality's picture

BUT, BUT, wait, a year ago everyone was calling manipulation, lead by ZH in the CME rising margins to screw all the sheep. Now what is the conspiracy and who are they screwing or maybe they are doing this because there is NO demand and rates go DOWN with NO demand!!!!!!!!!!!!!!! and rates RISE when in high demand.


Maybe people should revisit the law of supply and demand!!!!!!!!!!

Fri, 12/28/2012 - 18:53 | 3103374 seek
seek's picture

That argument would be a shitload more credible if they lowered the margins a week before OpEx instead of a week after.

Oh, but raising margins -- do that a week before OpEx in the rising market.

Timing has nothing to do with supply and demand, and everyting to do with making sure one or two large options players always have a downside right before OpEx.

Fri, 12/28/2012 - 19:15 | 3103453 UnRealized Reality
UnRealized Reality's picture

I've been hearing this crap about options for 4 years and if these losers want to play, stop crying when you lose.Furthermore if they believe this so-call conspiracy crap, they shouldn't be in the market or be on the right side. If it's that easy to recognize this manipulation, everyone, including ZH would be rich, so why the fuck are you here then. This has nothing to do with option anyway, it's about RATES and how they are affected by the markets. NO one ever cry's when they win.

Fri, 12/28/2012 - 19:34 | 3103547 seek
seek's picture

I've been hearing this crap about options for 4 years and if these losers want to play, stop crying when you lose.Furthermore if they believe this so-call conspiracy crap, they shouldn't be in the market or be on the right side. If it's that easy to recognize this manipulation, everyone, including ZH would be rich, so why the fuck are you here then. This has nothing to do with option anyway, it's about RATES and how they are affected by the markets. NO one ever cry's when they win.


You may have missed the memo on this. ZH has one of the wealthiest demographics of any financial news blog. We're here to share observations and understand the world we live in, and share some brotherhood with others that have woken the fuck up. I'm towards the upper end of the top 1%, and my frequent visits here help maintain my sanity while I watch insane markets, and information shared here has been critical in preserving my wealth.

This has plenty to do with options, which are used by major banks to manipulate metals pricing. CME further manipulates pricing via margins, timed specifically to favor those that are effectively short metals -- those same banks. Our complaints are not about losing, they're about the market not being free. As is stands, I and many others here profit from the manipulations regularly, either on paper or though lower prices on physical metals -- but just because we do doesn't mean we condone the blatantly unlawful manipulation that's occurring here.


Fri, 12/28/2012 - 19:45 | 3103582 DoChenRollingBearing
DoChenRollingBearing's picture

+ 1, even though it does not show (begins with a quotation?).  Yes, we are here to learn more.  And especially learning more about PM price manipulation.

Yes, completely agree about maintaining sanity (what I have left anyway) while seeing the markets bent toward the ones behind the curtain.  I don't play the trading game, having a terrible record trying, so I just stick to the physical.  Less likely I will be cheated, and more likely I will have something if/when it all comes crashing down.

I too will just consider myself lucky that I could get gold at what appears to be have been very low prices, even if the Banksters are blatantly rigging the paper game...

Fri, 12/28/2012 - 19:54 | 3103614 Al Huxley
Al Huxley's picture

Yes, you can't really lose holding physical gold (other than via outright theft) because you're just holding cash (which is a damn good idea).  Those who talk about losing on physical gold, due to price movements, are missing the point of holding it to begin with.

Sat, 12/29/2012 - 12:04 | 3104522 e_goldstein
e_goldstein's picture

Maybe people should revisit the law of supply and demand!!!!!!!!!!

I'll do it if the chairsatan goes first.
Fri, 12/28/2012 - 18:59 | 3103396 RagnarDanneskjold
RagnarDanneskjold's picture

Gold margin up? It's a trap! Gold margin down? It's a trap!

Fri, 12/28/2012 - 19:01 | 3103405 disabledvet
disabledvet's picture

"beggar thy neighbor." the currency wars are upon us...the gold "will be set by the President when he rolls out of bed in the morning."

Fri, 12/28/2012 - 19:04 | 3103419 q99x2
q99x2's picture

Prediction: The Dow will close within a point of 13,000 on Dec 31, 2012.


Fri, 12/28/2012 - 19:46 | 3103584 seek
seek's picture

I agree, and the leading digits will not be 12.

HAL9000's dial-a-DOW algo to the rescue.

Fri, 12/28/2012 - 19:18 | 3103466 mark mchugh
mark mchugh's picture

I have to disagree with the consensus here.

There are always two dynamics in play.

  1. Cheating papergoldbugs every chance they get.
  2. Not giving away the metal at too low a price.

I think they are currently more worried about having to deliver at current prices than fucking over paper traders.  I say it goes higher in January.  I guess we'll see.

Fri, 12/28/2012 - 19:37 | 3103561 DoChenRollingBearing
DoChenRollingBearing's picture

+ 1 for interesting point as well as prediction.  


I guess we'll see, yes we will.  When the BIG owners of physical decline to sell, even if there is MORE demand, then the fun starts...  Got gold?

Sat, 12/29/2012 - 17:19 | 3105240 auric1234
auric1234's picture

This makes sense. But what is the ultimate purpose? 2 is essential to keep running the game, and 1 gives them profit. So is this just about making profit? Or is there a further intent (e.g. making gold appear "worthless" as a wealth preservation vehicle so that people go back to paper).


Sat, 12/29/2012 - 22:44 | 3105845 mark mchugh
mark mchugh's picture

I think it's a question of balance.  They want to people to value the paper, not the metal and I think that's the ultimate purpose.  But devalue the metal too much and you risk losing it.

Remember that for every dollar used to actually takes posession of metal, there's probably $500 used betting on price action (maybe more).  If you never let the paper traders win, they'll go away, and you now run the risk a run on the physical metal at bargain prices.  China could buy all the COMEX gold with its pocket change, and people who cannot offer gold for settlement have no say on price.  US markets already have ZERO ability to set prices on rare earth metals.

So from time to time, I think you've gotta let the little guy win to keep the game going in the same way that even the crookedest of casinos will have to shut down if nobody will come to play.

When I look at a long-term gold chart I see what I call a "managed retreat" within a price channel.

That price channel has broken down recently, and if I were them, I be getting concerned that somebody might step up and take a lot of gold at a little price.


Fri, 12/28/2012 - 19:52 | 3103601 Al Huxley
Al Huxley's picture

The given reason for reducing the margin, I believe, is due to decreased volatility.  Also, price is lower, so it makes sense to have a lower margin requirement.  Similarly, margin requirements go up when the price rises and/or volatility increases.  The timing of the increases and decreases in margin (coupled with the 'odd' behaviour of large scale sellers, who so frequently seem to unload huge positions without regard to price) is what makes the official explanations, if still legitimate, somewhat suspect in their intent.  Looking at the COTs, it would appear that even with protracted weakness in price the commercial side hasn't been able to drastically reduce their short position.  What would be useful would be to have some highly margined weak longs to force into margin call situation on the next big 'I must sell all my gold at once, regardless of price') market event, to at least provide some free selling pressure and hopefully trigger a large enough wave of selling to allow the commercials to reduce their short positions in a more significant way.  If the official reasons for margin reductions and hikes lends itself to manipulative behaviour on large players with vested interests in the way the market moves, well, just a lucky break for those large players. 


And yes, I think it's a fair comment to say that anybody who plays along in the paper game and sticks their head in the noose being held open for them deserves what they get.  But for those who swallow the official line and don't buy the 'manipulation' argument, then it's not a noose to begin with, it's a 'profit opportunity'.

Fri, 12/28/2012 - 22:04 | 3103667 ZeroAvatar
ZeroAvatar's picture





                                   [         /




                "Here, fishy, fishy......................"

Fri, 12/28/2012 - 20:09 | 3103677 logicalman
logicalman's picture

Wouldn't it be nice if the world made sense?

Fri, 12/28/2012 - 22:27 | 3103983 americanspirit
americanspirit's picture

Unfortunately that would require that humans ( who interpret what they believe to be 'the world') are rational.

Fri, 12/28/2012 - 22:23 | 3103974 orangegeek
orangegeek's picture

Gold daily has been moving sideways for some time.


Indicators still show trend is down.  Time will tell.

Fri, 12/28/2012 - 22:38 | 3104004 Manipuflation
Manipuflation's picture

I say trap.  These CME people are fucking pricks.  Wait.

Fri, 12/28/2012 - 22:53 | 3104035 Honest_Money
Honest_Money's picture

The CME wants more trading volume, and the big Wall Street traders want the trend followers to sell/short so they can cover.

Fri, 12/28/2012 - 23:14 | 3104072 Manipuflation
Manipuflation's picture

Agreed.  Bear trap.

Fri, 12/28/2012 - 23:23 | 3104083 BaggerDon
BaggerDon's picture

With volatility spiking to 6 month highs, what are the possibilities that CME raises margin requirements on ES or other index futures????? slim and none?

Fri, 12/28/2012 - 23:57 | 3104135 Manipuflation
Manipuflation's picture

Appreciated comment BD.

Sat, 12/29/2012 - 01:43 | 3104225 Youri Carma
Youri Carma's picture

"It may well be up to the last trading session of the year to determine who wins in 2012: rock or paper."


Rock or Paper? You mean the only Real Money on the world, the only precious metal that can't corrode and keep it's shine over thousands of years, Gold or Paper, hence Real Money or Fake Money?

Sat, 12/29/2012 - 07:08 | 3104350 VonManstein
VonManstein's picture

Has anyone considered that this may be to support the Shorts in the Gold market, as they are the most underwater and insolvent? Lower margins for more shorting?

Or as the unmanigable rush for physical increases "they" are desperate to get peolple back into the paper market.. as that is how they control price. OI in Gold is not that high. COMEX "price discovery" is loosing its credibility.

Just a thought.

Sat, 12/29/2012 - 12:19 | 3104535 Al Huxley
Al Huxley's picture

Yes, that's essentially the point I was making above.  Bring in weak, highly leveraged longs using the completely justifiable drop in margin requirements, let the paper price rise rapidly to choke of the physical bleed, at an opportune moment, crush the market with a massive 'sell it all now!' order, forcing the weak paper longs quickly out of the market, and hopefully triggering a large enough selloff to reduce the short:long ratio (commercial) to something less extreme (while still trying not to go so low as to radically increase the physical bleed).

Sat, 12/29/2012 - 17:53 | 3105310 auric1234
auric1234's picture

But wait... a long can break only if price goes back to the price it had when the long was opened.

Are you suggesting that they plan to go back to current price? Or maybe they expect the longs to become even weaker by increasing leverage afterwards? Their target victims are really so greedy?


Sat, 12/29/2012 - 22:04 | 3105775 Al Huxley
Al Huxley's picture

I'm suggesting that by lowering the margins, they draw the buyers in and let the price rise, which in turn brings in more buyers, also leveraged, then at some point the plug is pulled, the 'uptrend' broken, the latecomers get squeezed out because of the leverage, which works against them, and yes, maybe the price breaks below the current level, which has the negative effect of allowing more physical out of the system at a discount, but the positive effect of letting the commercials close their short positions at a better profit.  Shorting now against the current price would be riskier, as it MIGHT break the price lower, but it might just get absorbed by longs happy to get longer at a discount, eventually leading to a big squeeze.  And yes, as surprising as it sounds, evidence suggests that the long side really is this gullible and greedy.  I suspect this is because there's some rotation of the players on the speculative long side, while the commercial short side has been perfecting this game for many years.  I also strongly suspect that, while institutionally, the commercials may be short paper gold, the individuals behind the institutions are massively long gold, and have  been since Gordon Brown sold out the UK so many years ago.

Sat, 12/29/2012 - 08:29 | 3104384 dcb
dcb's picture

1) am I the only person who actually looked at the cme pdf. based on the post by tyler one would tyhink the majority of the margin requirments are increased. even with crude I see decreases. I don't know how this will effect my wti etf.

2) I would like to know how the cme group reaches their margin requirement choices. I want to know who they communicate with, who the people are that make these choices. esp since crude looks ike it is setting up for a break out

3) many firms stopped using wti as a indes for pricing because of back up at "henry hub" and have moved to brent. I notice a lot of decreased margin requirements for brent. any thoughts from anyone


I may also nt be reading things correctly at all

Sat, 12/29/2012 - 09:54 | 3104430 edwardo1
edwardo1's picture

"Surely cutting the margins is a way of trying to get more people to buy gold? Which kind of suggests that they are desperate to prop up the price of gold?"


It's an attempt to prop up the gold derivative markets.

Sat, 12/29/2012 - 11:07 | 3104472 RalfRalf
RalfRalf's picture

It is interesting they are lowering margins now, especially when there is no deal with the Fiscal Cliff?

So stocks will tank! But what about the new Basel 3 Rules making gold Tier 1? Don't they take effect 1 January?

Maybe they want Gold and silver to go up? They have had plenty of time to buy physical themselves and prepare!

Might be a good idea to buy now, before 1 January just in case. You can't trust these pricks!


Sat, 12/29/2012 - 17:55 | 3105315 auric1234
auric1234's picture

Nope, Basel 3 isn't taking effect yet. Not inmediately.

See this article from Eric Sprott on the topic:


Sat, 12/29/2012 - 12:30 | 3104541 Conax
Conax's picture

Silver was about 28.XX last New Years Eve, and I'd bet the monkey hammer will be pounding it flat Sunday night/Monday.

In gold the participation rate in the comex has been falling and they need players in their casino to keep the game going. (edit: The Shanghai Exchange just raised theirs by 1%, assisting our crooks in apparent sympathy with them.)

But silver will be absolutely assaulted Monday.  Whoever called Monday "Paint the Tape Day" knows what's up.  BTFD.

Sat, 12/29/2012 - 13:26 | 3104667 X-Class Flare
X-Class Flare's picture

Not much mystery here:  Some "unknown trading entities" wipe the book clean of offers in after-hours slow trading, with repeated slam jobs not finding any buyers coming in behind.  So do it until it no longer works, which was the twin low on 12/20 and 12/21.

Now the game is to load in on the long side and get your cronies at the CME to lower margins.

To quote the immortal Ira Gershwin: "Nice Work if You Can Get It"

Sun, 12/30/2012 - 02:02 | 3106076 2 cents
2 cents's picture

Obviously lowering the margin on gold is the bait for a trap.

Lets see...judging by the number of short contracts the bankers filled in this week's gold price takedown, the bullion banks need to wash and rinse the COMEX paper market just 4 more times and they'll have filled their ENTIRE GOLD SHORT POSITION.

Do NOT follow this link or you will be banned from the site!