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

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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...

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.

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.

Solarman's picture

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

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.

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.


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...

NOPOMO's picture

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

Rock always wins against paper.

The Gooch's picture

Rochambeau, defined.

Thank you.

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!


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.

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.

Seasmoke's picture

Patrick Starfish always picks paper.

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.

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.

tallen's picture

Pros: Debt Downgrade.

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

rehypothecator's picture

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

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)

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?

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!!!!!!!!!!

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.

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.

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.


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...

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.

e_goldstein's picture

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

I'll do it if the chairsatan goes first.
RagnarDanneskjold's picture

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

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."

q99x2's picture

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


seek's picture

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

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

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.

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?

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).


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.


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'.

ZeroAvatar's picture





                                   [         /




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

logicalman's picture

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

americanspirit's picture

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

orangegeek's picture

Gold daily has been moving sideways for some time.


Indicators still show trend is down.  Time will tell.

Manipuflation's picture

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

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.

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?

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?

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.

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).

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?


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.

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