Is Another Record ECB Margin Call Impairing Gold Again?

Tyler Durden's picture

In an update of our post from a week ago, the ECB has increased its margin calls on European banks by EUR162 million this week to another record high of over EUR17.3 billion. While our pointing out of this huge jump from 'average' historical margin calls last week was met with - it's temporary/transitory due to temporary/transitory ineligibility of defaulted (and since undefaulted) Greek bonds (which given the rise this week has now been proven incorrect) or the more prosaic "don't worry, be happy", we remain concerned at both the velocity and now sustained size of these margin calls (as clearly collateral quality has dropped rapidly and remained weak). This is concerning since it would appear we had a good week for collateral (risk assets) in general, so we can only imagine what garbage is clogging the ECB's balance sheet. The side-effect of this appears to be (as we pointed out here) that Gold (the banks' remaining quality collateral) is being sold to cover these margin calls just as it was in September 2011 (though lease rates have not squeezed as much this time). We can only imagine the size of these margin calls should we happen to have a week where AAPL stock drops or BTPs don't rally (broad collateral actually loses value), but that seems impossible anyway.

ECB Margin Calls to European Banks rose once again to record highs...

And Gold remains offered as the need to fund these margin calls means finding money under every mattress and selling whatever banks have to meet the central banks demands...

 

Interesting that gold lease rates did not drop (soar from the other side) in a squeeze this time - as they did in September 2011.

Charts: Bloomberg

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SDRII's picture

Italy government guaranteed 78B of bank bonds  for collateral purposes at ECB per Germany Die Zeit newspaper.

GetZeeGold's picture

 

 

Yeah.....first thing you should do when you see an entire continent sliding off a cliff is to sell your gold.

 

Thanks for the subsidized gold amigos......those Euroland guys are clearly rocket scientists.

 

fourchan's picture

gold is reacting inversly to the dollar yen pair as the dollar strengnthens...that is all.

 

the dollar has retard strength.

caconhma's picture

<Is Another Record ECB Margin Call Impairing Gold Again?>  It is BS.

Just loot at the first chart above. The last ECB Margin Call did not create any meaningful change in gold prices.

 

Now, why is gold prices under pressure now? Is the world economic situation under control? Hardly! 

So, what is going on? It is an election year in the USA and an EU year of "Be or not to be".  Therefore, Central banks must print. It is only possible if there is no inflation and Gold is the inflation best indicator.

DrunkHarryReid's picture

You mean USD has super-retard on PCP strength. Eventually the drugs wear off.

tonyw's picture

Germany has figured it's not getting any gold back so it might as well sell to a greater sucker and at least get dollars which it can use for something tangible.

Cult_of_Reason's picture

Equity shorts (who are also gold longs) are getting margin calls and selling gold.

larynx's picture

G*d dammnit - You got me, But im not thinking about selling my gold, but to get rid of that damn 12,750 strike,  DJ put.

non_anon's picture

when will they ever learn, bitchez

Quintus's picture

So what happens to gold prices when every last ounce has been sold in desperation to the 'Strong hands' buyers in Asia and the ME?

If the suggestion is that gold is the last worthwhile asset that the banking system possesses, and further that it is on firesale at the moment, shouldn't everyone be putting two and two together and taking advantage by buying some?

LawsofPhysics's picture

Wait for it, more of Europe's gold to go on sale shortly.

GetZeeGold's picture

 

 

I'll buying now.....just in case someone finds the last live braincell over there.

 

akuacumen's picture

I think the action on Feb 29th scared a lot of buyers as everything is good/fixed/sustainable rhetoric is being widely populized once again by MSM. The bad news is either underplayed or completely ignored while any bit of good is overemphasized and blown out of proportion. The drop on 29th also caused a lot of technical damage on short term charts that was only made worse since as gold has been pushed to the limit of technical supports ... we are alsmost at multi-year trendline support. I think we will see further downside ... election year and Ben a the hero now! http://www.businessinsider.com/the-atlantic-is-bernanke-a-hero-or-villain-2012-3

tabasco71's picture

My train of though is similar - difficult to scream it though as its hard to tell whether its a dip or a slide.... 

What if, once its all been sold, the Western economies suddenly tell the Eastern economies that gold is worthless as it has no practical application.

There's a few years of precedent that suggest thats not the case and maybe the new banks are building their reserves on corner stones of gold just like the old banks did.

Rip van Wrinkle's picture

Because, when the day comes to tell the East, the west will,hold no power.

topshelfstuff's picture

I think it may very well be going like this, a Mark to [unmentioned] Discounted Price for Payment in Gold. Example: each 2,000 can be paid at a Discounted Price of 1,650 if you pay in Gold, and don't mention it.

So actually the Gold is getting a Valuation of 2,000 though all that shows is 1,650.

To me this sounds just like something the Bankers would concoct.

sudzee's picture

Greek gold on the open market. Spanish gold next. 

LawsofPhysics's picture

Make it 100% fuckers, I dare you.

Sudden Debt's picture

He guys, I charge 1000$ a month to lease 1 gold ounce! And you can lease as much as you want to!

Just wire me the money, and I'll send you a mail that confirms you leased a ounce!

Same for my silver!

And if you want to, I'll even include a picture of the gold and silver with the mail!

no touching of course... but who would want that right?

 

HurricaneSeason's picture

I do need some quickly. Is that an allocated account?

GetZeeGold's picture

 

 

It's a little more tricky......it's hypothetically allocated.

 

Plan accordingly.

 

HurricaneSeason's picture

Does hypothetically mean non-taxable, like for an IRA?

savagegoose's picture

hey i can do it cheaper., ill  lease 1 oz for $10/ month.   after all hypothetical unallocated gold has the lowest storage costs available.   and now you can use paypal.,

send a pic of yourself and ill send a pic back, with an oz sitting on your photo.

scatterbrains's picture

just a thought but if at some point in the distant future they were planning to ban gold ownership would they squeeze the shit out of longs via margin hikes, paper dumping etc  driving the price back down into the 3 digit level first before the ban hits and then coming in and scooping it all up on the cheap (while everyone else is barred from buying/owning it) ? What happened to the price of gold months and weeks just before the last ban on gold ownership was announced ? Not saying I think that's coming but just playing "what if"  for a minute here.

 

The Axe's picture

That would make sense, however the tech damage on the charts is not good, but SLV is not as weak, though a break of 31.83   won't be good....

BandGap's picture

Is this physical gold or the paper kind? It would make a difference.  Do the people calling in the margins accept pieces of paper or do they take the real thing (or a guarantee of the real thing)?  Same for silver.

Chaffinch's picture

Normal attacks on gold have a bigger effect on silver, so normally when the prices of the PMs fall, the Gold:Silver ratio rises. Today is unusual - this is very much to do with gold on its own - silver is less bothered - so maybe Tyler has a good point here - maybe there is a different kind of selling going on today. I wonder who is buying at bargain prices (apart from us!) - the ECB perhaps? Or are some of the other CBs quietly building up their stockpiles?

LongBalls's picture

No need to wonder. You can bet you sweet cheeks China and Russia are buyers. 

escobar's picture

I did a post on Buffett and Gold recently. Let me know what you guys think. Thx

http://somanyroadsinvesting.blogspot.com/2012/03/desperation-time-how-coincidental.html

kaa1016's picture

It's simple. No QE announcement from the Fed, plus better U.S. data, equals a stronger dollar and leveraged gold longs get blown out. Gold is a currency hedge, nothing more. I think the market move to the upside is over done, but it doesn't matter what I think. The only thing that matters is what's happening and am I on the right side of the trade. Everything else is just conversation. Long AAPL calls, and short the 30 year and gold. For now at least...

Chief_Illiniwek's picture

Anyone suggesting that AAPL's stock price drop - at any time - is CLEARLY not running for office.

mantrid's picture

Germany trying to weaken EURUSD without exlipcit printing via initiating sell-offs? remember these demands for hikes came from Bundesbank.

walidsassia's picture

Now everybody is Selling Gold and Buying AAPL, it contains some gold in the microships so why not 

 

bugs_'s picture

if you do buy their gold, take delivery.

Crispy's picture

bonds collapsing -  yields rising - gold falling - buy more gold...

east paris trader's picture

By looking at the charts, you can see the liquidation taking place all week.   Starts at midnight (EST) and continues into the NYSE open (more or less).   In addition, there has been bursts of dumping (not for profit sellers) that exaggerate the sell offs.

Little voice in my head keeps telling me that the Comex is an expendable tool of the elite.   JPM (etal..) can't cover their paper and they know it.  They also don't care.  They ultimately know Comex is going under, but will continue to use to their purposes until it explodes.   CFTC is powerless due to their past sins being used against them. 

Looks to me like paper gold is going to be sold down to $0.   Yes, physical is the answer, but its going to be a walk through the valley of evil.

 

junkyardjack's picture

Everyone selling gold to get back into stocks is what it seems like.  Gold is going to show a little weakness but since everything is going up because of inflation it won't completely collapse.  

APMEX's picture

Gold has traded down making new lows this morning to 1639.  It is now up a bit as bargain hunters return to the market but not with the same fury as last week.  It makes it hard to recover after making new short term lows and with what was a better than expected Retail Sales number combined with confirmation from the Federal Reserve that no new direction is pending and that strategies will remain the same. Brushing issues under the rug, which has now become the modus operandi of many governments, will not solve anything.  Greece has been pushed out of the news as if all is well. In reality the austerity measures that are being heaped on the people in that country will only cause higher tax evasion and more civil unrest which basically means a lesser likelihood those debts will get paid. So we have the short term reaction on positive news without the wisdom to see the full picture. That is the difference between a day trade and a position trade. It appears to me that the negative still outweighs the positive but in the end, like the frog in the pot of water, so many are getting used to the hot temperature of the water that when it starts to boil it may be too late.

The rest of the precious metals group is faring better. The Platinum Group Metals which, in our opinion, have been undervalued for a while have been holding their ground against the onslaught against gold. The basic fundamentals of these metals, auto consumption for auto catalyst has remained steady and that should be enough on its own in what is a much less liquid supply of metal. Still gold remains the true indicator of the value of currencies and the only possible real international specie after the USD and Euro. Silver this morning has followed gold to the downside and lost 3% since yesterday. Expect the downward pressure to continue for a short time as traders test current levels. Long term thinkers may be wise to buy on these dips.

GetZeeGold's picture

 

 

What do the boys over at JPM think about silver?

 

APMEX's picture

We believe that silver is not moving on its own, its following the gold market. They seem to be recovering a bit and there is a possibility for more recovery depending on whether people see this as an opportunity to buy

eddiebe's picture

I think we are over-thinking this. This is manipulation pure and simple like it has been since forever by central banks.  It came to their notice that every time Ben opened his mouth gold went up, so the last couple of times they stepped on it.

 As it stands now, something is up behind the closed doors with the whole ISDA Greek non default derivatives event which will cause another quake when the banksters do some more obfuscating on March 23rd I believe on that particular issue. I assume that will be extremely gold friendly, or they think it may be, so they are doing some pre emptive short selling to keep everything in gold land uncertain and unhinged and suppressed.

 Meanwhile the BIG boyz are keeping the large buyers ( China, Middle eastern oil suppliers, and anyone else that will absolutely not settle for mere fiat ) happy with physical plundered from Libya and now Greece since every other ounce has been re-hypothecated to the max if not vaporized.

 Certainly tha boyz are feeling the pressure of inquiring minds when they release a video report through CNBC about, and showing, pallets stacked with gold bricks at certain undisclosed locations for SPDR gold trust.

Same old shit gold bugs,not to worry, our day will come 

Blubaba's picture

In the articel from reuters, there is mentioned that the Gold holdings from the european central banks are increasing:

http://www.reuters.com/article/2012/03/13/ecb-reserves-idUSL5E8EDA6N2012...

That means that the central banks are net BUYER, not SELLER....

ACjourneyman's picture

Sell gold to buy Apple stock short at 600, market crash is coming after election, sell apple short , buy twice as much gold.

RagnarDanneskjold's picture

Chinese economy and renminbi hammer gold prices?

http://investinginchinesestocks.blogspot.com/2012/03/chinese-economy-and-renminbi-hammer.html

Hendry showed the renminbi/oil connection in 2008. Gold is to China as oil was to China in 2008.

RazorForex's picture

The weekly and monthy charts were screaming short on Gold since last week.

http://www.youtube.com/watch?v=Uj1_s5EEFjw

Weekly Gold chart Technical Analysis

persu's picture

Again, I would like to point out that also bonds can be pledged as collateral with a haircut. True, proposition sounds pretty scary, but does not necessarility lead to forced sale of bonds as article implies.
Between banks, acceptable collateral is usually cash or government bonds. Eligibility of other bonds depnds on agreement.
Anyway, ECB has watered every rule on its way. Henve it would not surprise if they had twisted these rules as well. Bi-lateral agreements are confidential or what does ECB accept as a collateral?

tekhneek's picture

Silver, dip you heartless bitch.

I'm holding out for sub-30s still.

GrinandBearit's picture

Why are the cable tv business channels showing gold down over -$40/oz and Kitco is showing -$25/oz ?

I've noticed this happens a lot.