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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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Wed, 03/14/2012 - 09:13 | Link to Comment SDRII
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Italy government guaranteed 78B of bank bonds  for collateral purposes at ECB per Germany Die Zeit newspaper.

Wed, 03/14/2012 - 09:24 | Link to Comment GetZeeGold
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.

 

Wed, 03/14/2012 - 09:41 | Link to Comment fourchan
fourchan's picture

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

 

the dollar has retard strength.

Wed, 03/14/2012 - 10:11 | Link to Comment caconhma
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.

Thu, 03/15/2012 - 01:32 | Link to Comment DrunkHarryReid
DrunkHarryReid's picture

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

Wed, 03/14/2012 - 13:21 | Link to Comment tonyw
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.

Wed, 03/14/2012 - 09:16 | Link to Comment Cult_of_Reason
Cult_of_Reason's picture

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

Wed, 03/14/2012 - 15:02 | Link to Comment larynx
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.

Wed, 03/14/2012 - 09:13 | Link to Comment non_anon
non_anon's picture

when will they ever learn, bitchez

Wed, 03/14/2012 - 09:13 | Link to Comment Quintus
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?

Wed, 03/14/2012 - 09:17 | Link to Comment LawsofPhysics
LawsofPhysics's picture

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

Wed, 03/14/2012 - 09:25 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

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

 

Wed, 03/14/2012 - 09:19 | Link to Comment akuacumen
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

Wed, 03/14/2012 - 09:39 | Link to Comment tabasco71
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.

Wed, 03/14/2012 - 10:12 | Link to Comment Rip van Wrinkle
Rip van Wrinkle's picture

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

Wed, 03/14/2012 - 11:21 | Link to Comment topshelfstuff
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.

Wed, 03/14/2012 - 09:15 | Link to Comment sudzee
sudzee's picture

Greek gold on the open market. Spanish gold next. 

Wed, 03/14/2012 - 09:16 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Make it 100% fuckers, I dare you.

Wed, 03/14/2012 - 09:18 | Link to Comment Sudden Debt
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?

 

Wed, 03/14/2012 - 09:36 | Link to Comment HurricaneSeason
HurricaneSeason's picture

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

Wed, 03/14/2012 - 10:04 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

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

 

Plan accordingly.

 

Wed, 03/14/2012 - 13:50 | Link to Comment HurricaneSeason
HurricaneSeason's picture

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

Wed, 03/14/2012 - 17:30 | Link to Comment savagegoose
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.

Wed, 03/14/2012 - 09:18 | Link to Comment scatterbrains
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.

 

Wed, 03/14/2012 - 09:20 | Link to Comment The Axe
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....

Wed, 03/14/2012 - 09:21 | Link to Comment BandGap
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.

Wed, 03/14/2012 - 09:22 | Link to Comment Chaffinch
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?

Wed, 03/14/2012 - 09:47 | Link to Comment LongBalls
LongBalls's picture

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

Wed, 03/14/2012 - 09:25 | Link to Comment escobar
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

Wed, 03/14/2012 - 09:25 | Link to Comment kaa1016
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...

Wed, 03/14/2012 - 09:26 | Link to Comment Chief_Illiniwek
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Anyone suggesting that AAPL's stock price drop - at any time - is CLEARLY not running for office.

Wed, 03/14/2012 - 09:30 | Link to Comment mantrid
mantrid's picture

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

Wed, 03/14/2012 - 09:36 | Link to Comment walidsassia
walidsassia's picture

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

 

Wed, 03/14/2012 - 09:36 | Link to Comment bugs_
bugs_'s picture

if you do buy their gold, take delivery.

Wed, 03/14/2012 - 09:37 | Link to Comment Crispy
Crispy's picture

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

Wed, 03/14/2012 - 09:39 | Link to Comment east paris trader
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.

 

Wed, 03/14/2012 - 09:45 | Link to Comment resurger
resurger's picture

All is well

Wed, 03/14/2012 - 09:45 | Link to Comment junkyardjack
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.  

Wed, 03/14/2012 - 09:51 | Link to Comment APMEX
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.

Wed, 03/14/2012 - 10:07 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

What do the boys over at JPM think about silver?

 

Wed, 03/14/2012 - 10:32 | Link to Comment APMEX
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

Wed, 03/14/2012 - 09:54 | Link to Comment eddiebe
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 

Wed, 03/14/2012 - 09:57 | Link to Comment Blubaba
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....

Wed, 03/14/2012 - 10:14 | Link to Comment APMEX
APMEX's picture
Gold Seen Heading for 12th Annual Advance on Investor Hoarding http://www.bloomberg.com/news/2012-03-14/gold-seen-heading-for-12th-annu...
Wed, 03/14/2012 - 10:02 | Link to Comment ACjourneyman
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.

Wed, 03/14/2012 - 10:03 | Link to Comment RagnarDanneskjold
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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.

Wed, 03/14/2012 - 10:24 | Link to Comment RazorForex
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

Wed, 03/14/2012 - 10:26 | Link to Comment persu
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?

Wed, 03/14/2012 - 11:01 | Link to Comment tekhneek
tekhneek's picture

Silver, dip you heartless bitch.

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

Wed, 03/14/2012 - 11:26 | Link to Comment GrinandBearit
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.

 

Wed, 03/14/2012 - 14:34 | Link to Comment EINSILVERGUY
EINSILVERGUY's picture

Same thing with Gainsville.

I bought some silver and gold this morning.   Had CNBC Metals tab up and showing gold down $46 and Silver down $.96 and yet Gainsville had Gold down $25 and Silver < $.60. I know there are timing issues but come on

Bought anyway but dammit I probably paid $10 more for my purchase than I wanted.

Maybe I'm being a bit greedy or just know the value of a dollar.  no wait, let me rethink that

 

Wed, 03/14/2012 - 15:02 | Link to Comment Papasmurf
Papasmurf's picture

Because kitco is selling.

Wed, 03/14/2012 - 13:10 | Link to Comment passwordis
passwordis's picture

  It's margin calls. It's the strength of the dollar.  It's Bin Laden's death. It's Bernanke's latest comments. It's QE3. It's Obama's stimulus. It's the Greece default. It's a supply shortage.

 I've stopped listening to all of this speculation. None of it means a thing to me.  It may be a simplistic view but I believe as time goes on and it becomes apparent that the economy is not improving and is in fact getting worse... more and more people will by buying PMs. Over the last ten years the pattens seems to be that the price takes three steps forwards and two steps back..... after a year of this prices get whacked big time but you are still up significantly on a cost average if you hold.

Anyone holding PM's for the past ten years has done well.  However, I will admit that my wherewithal is eroding waiting for a rise in price in the multitudes. I think it's very likely to happen. I just don't know when..(and I worry about the capital controls that might accompany the rise in prices). Can the money power keep doing what they are doing for another five, ten or twenty years? 

 

Wed, 03/14/2012 - 12:43 | Link to Comment Lost Wages
Lost Wages's picture

I just happened to get a tax refund a few days ago, so this seems like a buying opportunity for silver. I don't think it'll go lower than the 31 range, but who knows.

Wed, 03/14/2012 - 14:52 | Link to Comment steve from virginia
steve from virginia's picture

 

If people would not think of gold-as-money but of gold as a non-money asset they would not be surprised.

The perception of gold: gold is not credit (that is the gold-holders' argument), gold is not currency b/c it does not circulate (the gold holders' argument is that gold is form of money but money is credit or currency (that credit is denominated in)). Gold is an asset paid for/exchanged for money (which includes credit). The credit side of the swap is effecting the price of gold.

Assets fluctuate in price. Gold may actually be entering a bear market. Shit happens. I wouldn't buy gold right now but I wouldn't sell, either.

I would say that gold/silver is struggling w/crude oil for market leadership. Gold has led the world's asset markets for 10 years: if the market turns lower across asset classes the metals are still leading.

Otherwise, markets will inch higher with defections (such as gold) until rising fuel prices stab the markets in the back. @ $125/barrel there won't be long to wait.

Another reason for tepid gold: depreciating rupee + high prices = Indian demand off 25%. India is world's gold consumer:

http://www.arabianbusiness.com/surging-gold-prices-push-indians-rein-in-...

 

 

Wed, 03/14/2012 - 21:47 | Link to Comment balz
balz's picture

I don't understand what are the EBC margin calls. I am lost.

Thu, 03/15/2012 - 01:33 | Link to Comment DrunkHarryReid
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:(

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