The Next Escalation: Gold Goes 100% Initial Margin

Tyler Durden's picture


The day many have predicted would come, has finally arrived: 100% initial margin on gold.

For now it is just one Futures Commission Merchant, in this case ex-CBOT traders Crossland LLC (motto: "Where Speed And Service Matter"), but tomorrow it will be another, and another.

In a dramatic flashback to the torrid days of 2011, when the CME and other exchanges desperately tried to scare away the weak hands by raising initial and maintenance margins on paper gold futures ever higher, and when many predicted that eventually the brokers and exchanges would simply do away margin completely in order to make levered trading in paper gold impossible, we have now witnessed the next shot across the bow aimed at all those who dare to oppose the central planners' scheme of forcing everyone out of hard assets, savings, bank deposits and other inert saved capital and into investing in ponzi capital markets, preferably on leverage, or otherwise spend their hard earned cash to buy stuff they don't need and stimulate inflation.

Of course, all this will do is simply shake out even more weak hands, making the residual base of holders that much most stable and not only eliminate the bulk of paper price volatility, but also lead to an even more profound breakage in the link between paper and hard gold.

Below is Crossland's notification to clients that starting tomorrow (we assume), the initial margin on gold and silver, will be 100%. In other words, the utility of a margin account is now null and void when trading PMs.

From: CustomerService <>
Subject: Margin Notice - Precious Metals
To: []
Date: Thursday, May 2, 2013, 3:46 PM


Crossland LLC is requiring all customers trading the precious metals, more specifically Gold and Silver, to be margined at 100% of initial for intraday trading.


Current margin for Gold is $7040 and for Silver is $12375


If it is the customers intention to trade the above products, it is recommended that you keep a minimum of $10,000 in your account at all times to trade Gold and a minimum of $15,000 to trade Silver.


Please note:  Crossland LLC always reserves the right to amend margins as we deem necessary.


Thank you


Krissy Metcalf
Customer Service Manager


How long until other brokers and exchanges follow suit? At the rate the onslaught to crush the last remaining "gold bug" is unfolding we expect that what Crossland just did will be a mandatory CFTC regulation in a few short months.

All hard asset resistance must be crushed!

And in other news, the delivery requests to JPM continue, as does the company's somewhat questionable strategy to make it appear it has no eligible deliverable problem by continuing to convert registered gold into commercial. Because while the bank's vault has not received one additional ounce of gold in over a week, just as it got another request for 24,028 oz of gold on Wednesday, the bank continues to "restock" by converting its stock of registered gold into eligible, this time "adding" another 57,860 oz (something HSBC decided to do as well), the fourth day in the past week it has done just this.


We wonder what happens if those holding gold warrants with JPM (i.e., registered stock) decide to inquire as to why over a hundred thousand ounces of their gold has been converted into eligible to satisfy ongoing delivery requests?

Finally we inquired how the CME goes about the entire process of reclassifying eligible gold into registered and vice versa. This is the response we got back:

... the adjustment column does reflect the issuance and cancellation of warrants, but it can be used for other purposes as well. Anything that is not received or withdrawn would be reported in the adjustment column.

Sufficiently vague to provide absolutely no real information on why it is happening or just who is cancelling their warrants, and whether it is voluntary or not. We would expect nothing less from the COMEX system of safe "vaulting."

h/t Ro and JQ

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Thu, 05/02/2013 - 19:38 | 3524480 Aeternus
Aeternus's picture

Bye Bye Paper Market - Hello Physical Market and True Price Discovery!

Thu, 05/02/2013 - 19:39 | 3524484 CrazyCooter
CrazyCooter's picture

Lower prices please!



Thu, 05/02/2013 - 19:55 | 3524537 knukles
knukles's picture

Now keep in mind the craziest of all paradigms that with the COMEX (I believe it was) that iMargin could be posted in Gold.
So, if the CRIMEX were to go to 100% iMargin then you could post your iMargin in Gold, meet your vMargins in Gold to support your paper (or pGold) gold so you're Fat Golden Goose awaiting Plucking a la Corzineing of your account.


Sumptin's wrong, Lucy

Seriously.  Why bother?
Unless you just want a Gazillion dollars in exposure you can't get anywhere else... but then again, even probably would make more sense to just be long GLD (as bad that could be) than to have that exposure with some FCM.
Jesus, people....

Thu, 05/02/2013 - 19:58 | 3524545 fonzannoon
fonzannoon's picture

Keep it simple knucks. That dumbfuck Celente probably just got caught with his pants down again buying on margin and they skanked him just for fun. He will be all over the place screaming about it tomorrow.

Laughs all around at the crimex.

Thu, 05/02/2013 - 20:09 | 3524567 ihedgemyhedges
ihedgemyhedges's picture


Thu, 05/02/2013 - 20:22 | 3524628 TwoShortPlanks
TwoShortPlanks's picture

GO FOR IT! Coz 110% isn't happening, and we get to end the foreplay once and for all.

Thu, 05/02/2013 - 20:31 | 3524658 Supernova Born
Supernova Born's picture

China, India, etc. will keep buying gold regardless of what is done to hostage Americans by the literally bankster-controlled federal government.

They can't stop the fight the between gold and baseless fiat bullshit. They can only make it an away game.

Thu, 05/02/2013 - 20:31 | 3524677 rehypothecator
rehypothecator's picture

I don't see what the big deal here is.  JPM's auditors found another 58,000 oz of gold that had only been sold 99 times, and so they have sold it, making it sold a nice, round, 100 times.  Just like all the other gold they, uh, "hold."  

Thu, 05/02/2013 - 20:41 | 3524697 TwoShortPlanks
TwoShortPlanks's picture

I would suggest that a margin hike to 100% would push paper up against the wall, where it can then be beaten to death. Remember, these guys never come down on the wrong side, so expect the same [Goldman] shenanigans which we saw in CDS and Shorting MBS pre-GFC to be played in this game too.

For all anyone knows, they could be building a very tidy physical position on the side (like shorting MBS). I seem to recall JPM getting a Bullion licence in record time (within less than a week) about 2-2.5 years ago....wonder what that was for? Tradition!

Thu, 05/02/2013 - 20:41 | 3524715 Manthong
Manthong's picture

Lucy got some 'splainin to do.

Thu, 05/02/2013 - 20:51 | 3524748 american eyedol
american eyedol's picture

i watch cnbc everyday and i have no idea what u guys are talking about? What does this mean for gold? Say it

Thu, 05/02/2013 - 20:54 | 3524759 TwoShortPlanks
TwoShortPlanks's picture

@ eyedol,

Just read as much as you can and catch up as fast as you can. Buying some physical may be a good idea too....maybe!

Thu, 05/02/2013 - 21:07 | 3524816 HoofHearted
HoofHearted's picture

Uh, this isn't as big of a deal as it seems. It just says that if you are day-trading you have to play by the same rules as the people holding overnight. If you think $7040 is going to buy you 5k ounces of silver, well...try again. 

I can't wait for the day we finally go cash and carry. Then those dumb fucks at JPM will finally get the spankings they deserve when the strong hands just hold for delivery. If you've already put 100% of the price down, you might as well get the shit.

Thu, 05/02/2013 - 22:45 | 3525137 americhinaman
americhinaman's picture

HH, exactly correct.

"to be margined at 100% of initial for intraday trading" just means that you have to post initial margin rather than maintenance (secondary) margin.  i.e. an extra $640 (post $7040 instead of $6400) to buy 100 oz. of gold with value ~$147,500.  it doesn't mean there's no leverage allowed, or that you have to post the full $147,500.

Margin Requirements
Speculator    Hedger
Initial    7,040    6,400
Secondary    6,400    6,400

the recommendation to hold a touch more than the min required is just them saying "don't go all in leveraged to the max". 

Thu, 05/02/2013 - 22:49 | 3525146 Pinto Currency
Pinto Currency's picture


There's a five alarm physical fire raging right now.

This margin increase is a thimble of water and simply wishful thinking on the part of price managers.  Just like Merrill Lynch cascading the markets on April 12 with a 300 tonne sell order, there will be no lasting effect - and it may even backfire just like ML's sell down of gold caused a stepwise increase in purchase of physical gold and silver.

Thu, 05/02/2013 - 23:16 | 3525212 strannick
strannick's picture

The futures meet the present, as COMEX contract holders with their 100% initial margin, to quote Jim Grant, now have the opportunity for ''returnless risk''

Thu, 05/02/2013 - 22:48 | 3525142 Pinto Currency
Pinto Currency's picture



Fri, 05/03/2013 - 12:15 | 3527281 bilbert
bilbert's picture

"i watch cnbc everyday and i have no idea what u guys are talking about?"

Classic! - you can't make this stuff up!

Eyedol - step away from the television. CNBS will poison your mind.


Thu, 05/02/2013 - 20:57 | 3524770 rubiconsolutions
rubiconsolutions's picture

Holy Rehypothecation Batman! Bam! Pow! Wam!

Thu, 05/02/2013 - 20:21 | 3524629 HulkHogan
HulkHogan's picture

Does anyone know if there's been a 100% margin on any other commodity market before?

Thu, 05/02/2013 - 20:24 | 3524644 HulkHogan
HulkHogan's picture

Answered my own question. Link is from the MGEX:

Thu, 05/02/2013 - 22:16 | 3525037 macholatte
macholatte's picture

Does anyone know if there's been a 100% margin on any other commodity market before?


As a matter of fact, this very issue came up a couple of years ago in the forex market. It might have been the result of Dodd-Frank, I don't recall.  anyway, trading gold and silver on the forex exchanges, like, went to 100% cash - zero margin.  I have no idea what happened to thier trading volume. My guess is that it was compromised significantly.


Thu, 05/02/2013 - 20:17 | 3524613 SAT 800
SAT 800's picture

You're right; it is the COMEX that accepts Gold Bullion for "iMARGIN"; as you so wittily observed. It is very droll. Let's see, you give them the Gold so you can have a contract on Gold; hm, hmm. Yeah, well, that sounds fair enough. LOL.

Fri, 05/03/2013 - 00:06 | 3525342 FEDbuster
FEDbuster's picture

Like a bankster requiring you to put up a $100K cash as collateral for a $100K loan.

Fri, 05/03/2013 - 01:19 | 3525449 olto
olto's picture

!00% margin is cash------who would trade futures at all rather than trade the cash?

A de-leveraged market will certainly cheer up my banker who is afraid of almost all collateral-----

He'll will definitely prefer a 'Tier one' item that we can mark to market every afternoon

Maybe, there will be a 'bullion bank' on every corner, except mine----it is all too complicated for this forest-dweller's small brain

unless I am the banker! 

Thu, 05/02/2013 - 20:41 | 3524717 TheProphet
TheProphet's picture

Exactly. Which is why I am unsure if I should be cheering or crying.

On one hand, this could drive down spot, and if spot stays down a while, create a buying opportunity.

On the other hand, it could force hedgers to hedger by taking possession rather than contracting. Not as likely to be used, but could certainly at least set a floor under gold, and perhaps influence the price upward.

Thu, 05/02/2013 - 20:41 | 3524718 TheProphet
TheProphet's picture

Exactly. Which is why I am unsure if I should be cheering or crying.

On one hand, this could drive down spot, and if spot stays down a while, create a buying opportunity.

On the other hand, it could force hedgers to hedger by taking possession rather than contracting. Not as likely to be used, but could certainly at least set a floor under gold, and perhaps influence the price upward.

Thu, 05/02/2013 - 20:54 | 3524732 Harbanger
Harbanger's picture

Thanks for the video Aeternus.  It made me sad but I needed to see it.  I never heard of the Tytler cycle before, it's worth posting:

"The historical cycle seems to be: From bondage to spiritual faith; from spiritual faith to courage; from courage to liberty; from liberty to abundance; from abundance to selfishness; from selfishness to apathy; from apathy to dependency; and from dependency back to bondage once more."

Fri, 05/03/2013 - 06:51 | 3525766 Fuh Querada
Fuh Querada's picture

Bring back Niko Bellic - puts an end to the Harlem paper market, permanently !

Thu, 05/02/2013 - 19:39 | 3524482 lineskis
lineskis's picture

More cheap physical, sweet! ;)

Thu, 05/02/2013 - 20:04 | 3524559 Hacked Economy
Hacked Economy's picture

Not only cheaper in the near-term, but it'll actually "firm up" the price floor (resistance) as gold buyers slowly move from paper over to physical.  That's a normal part of economics, credit availability is reduced, prices (homes, cars, assets) collapse down closer to cash prices.  With PMs, the reduction of leveraged trading allows for the physical buying to become more relevant, which brings the focus closer back to the "real" value in the real world.

Thu, 05/02/2013 - 19:39 | 3524486 fonzannoon
fonzannoon's picture

This seems like good news. No more margin. Buy it outright and take delivery. Buy facefart on margin if you must use margin.

Thu, 05/02/2013 - 19:56 | 3524539 knukles
knukles's picture

Makes no sense



Thu, 05/02/2013 - 20:16 | 3524607 DeadFred
DeadFred's picture

Why buy futures when for the same price you can buy spot? Seems to me they didn't just eliminate the counterparties for the next smackdown they just guaranteed most of the buyers will ask for delivery. Makes no sense unless they know the scam will be over before the next delivery.

Thu, 05/02/2013 - 21:17 | 3524855 spanish inquisition
spanish inquisition's picture

My conspiracy theory is that if you drive everyone out of the market for paper gold, then you get to set the price. Who cares if they ask for delivery, confiscation will be using the paper price that you set.

Thu, 05/02/2013 - 23:31 | 3525256 mayhem_korner
mayhem_korner's picture



My theory is that they are trying to crush PMs ahead of the equities collapse (for cover).  Let them all fall.  I know what will endure.

Thu, 05/02/2013 - 20:19 | 3524620 SAT 800
SAT 800's picture

It seems to me that the number of serious things that seriously don't make no sense is seriously increasing; but maybe I'm just seriously out of it.

Thu, 05/02/2013 - 20:52 | 3524751 RSBriggs
RSBriggs's picture


Fri, 05/03/2013 - 01:51 | 3525110 New World Chaos
New World Chaos's picture

This is the last big shakeout before the default.  If they are going to default, they might as well default big.  They short shitloads of metal that doesn't exist, buy physical for themselves on the way down, next they will destroy the market and never have to cover their shorts, even as they force longs and forward-hedged miners to eat printed cash payouts at a paper price which everyone knows is fraudulently low.

They still have a few big cards to shake out the phyz:

-100% cash market in London and New York.

-Ban public ownership of PMs; provide printed cash payouts of a few percent to successful narcs.

-All your mining stocks are belong to us.

-Supposedly end QE (which will mostly be for propaganda purposes and manufacturing a crash. They will continue to print in secret, so that the well-connected can buy up real stuff at pennies on the printed dollar).

Even if they do all this at once, I doubt they can smash the physical price though 16 / 1100, and that would be almost as short as a flash crash.  Only a few people would actually be able to buy at that price.  Probably they can't even get it down that far.  Fuck 'em.  Buy phyz anyway.

Hope you don't still have those leveraged silver futures you talked about multiple times?

Fri, 05/03/2013 - 01:56 | 3525515 Ignatius
Ignatius's picture

Big players we love to hate will not end up on the wrong side of physical PMs when it matters.


Fri, 05/03/2013 - 08:11 | 3525933 samcontrol
samcontrol's picture

paper pms will rise one more is the plan.

Thu, 05/02/2013 - 19:42 | 3524491 Rustysilver
Rustysilver's picture

I am welcoming this news with open arms.

Thu, 05/02/2013 - 19:42 | 3524492 AL_SWEARENGEN

Why trade Gold and Silver through these cocksucker's rigged casinos?  These iddiots know they have no cards left to play except manipulation and deception (was there ever anything else?)  Own physical in hand or you don't.

Thu, 05/02/2013 - 20:44 | 3524729 THECOMINGDEPRESSION

..ask TURD he plays paper all the time and loses this shit..2 face mongoloid

Thu, 05/02/2013 - 19:43 | 3524494 q99x2
q99x2's picture

Good signal to buy more physical gold and silver.

Thu, 05/02/2013 - 19:58 | 3524544 knukles
knukles's picture

For some reason, I concur....
This is fishy.

Like expanding volume and open interest when they smashed the PMs a couple weeks ago.  Weren't closing positions, people!

Thu, 05/02/2013 - 20:23 | 3524639 SAT 800
SAT 800's picture

I definitely agree that something don't smell kosher in Denmark. I been wondering about that very thing you just mentioned; I wonder if it's possible they got their dick slammed in the door? Weren't they supposed to scare everybody? like BOO!. But, as you say the number of open positions increased, it didn't decrease; and now we find out that Chinese house wives have bought 300TONNES, and not that is not a typo; of physical in the same time period. WTF? Is the band still playing? I mean if the band is still playing, then everything must be alright, right? even though the Deck seems a little tilty?

Thu, 05/02/2013 - 23:40 | 3525287 Crash Overide
Crash Overide's picture

"I wonder if it's possible they got their dick slammed in the door?"


I am sure there is a Bangkok joke in there somewhere...

Fri, 05/03/2013 - 06:53 | 3525767 Fuh Querada
Fuh Querada's picture

Yeah, there seems to be frigging in the rigging somewhere ...

Thu, 05/02/2013 - 20:30 | 3524672 Yen Cross
Yen Cross's picture

 Open Interest? B/S. Who is the "volume" player? What open interest in a volumeless market?

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