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Is Gold Suffering Under ECB Margin Calls?

Tyler Durden's picture


Last night we noted the very concerning rise in margin calls for European banks thanks to collateral degradation at the ECB. This story has become very popular as traders try to figure out which assets were deteriorating rapidly and which banks face immediate cash calls. One thing that came to mind for us was - what about Gold? Coincidentally or not, the last time we saw a big surge in collateral margin calls by the ECB (in September of last year), not only did Gold lease rates explode (implode) but Gold prices fell off a cliff as the squeeze came on from gold liquidity providers pushing prices down to exacerbate the negative lease rates on the gold collateral. The point here is that as margin calls come in from the ECB, we wonder whether banks will be forced to liquidate their gold (last quality collateral standing) to meet the ECB's risk standards. The key will be to watch gold lease rates (as we explained here and here) and ECB Margin calls to see if Gold is merely suffering a short-term dip from USD strength derisking or if this is  a more broad based meeting of collateral desperation need that might have legs - only to be bought back later. MtM losses combined with collateral calls (as we noted earlier) was never a recipe for success and we will be watching closely.



Charts: Bloomberg


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Wed, 03/07/2012 - 18:10 | 2233781 mayhem_korner
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The ECB has risk standards?

Wed, 03/07/2012 - 18:42 | 2233864 MillionDollarBonus_
MillionDollarBonus_'s picture

It puzzles me that struggling countries like Italy and France sit on tons of useless gold in vaults while their economies suffer. Why don't they pledge it as collateral to the ECB in order to attain credit for further fiscal stimulus? If doomer chumps want to bid over a thousand dollars for this junk, then why not take advantage of their ignorance by pledging useless bars of shiny metal for millions in spendable credit?  

Wed, 03/07/2012 - 18:42 | 2233883 Sudden Debt
Sudden Debt's picture

Would you?
Imagine italy would need to go back to the Lire. They need gold to do so.
Gold is plan Z. You know, when everything fails like it's doing now.

Wed, 03/07/2012 - 21:07 | 2234363 CIABS
CIABS's picture

Don't feed the trolls.

Wed, 03/07/2012 - 23:50 | 2234668 trav7777
trav7777's picture

c'mon, without some trolling how much fun would teh interwebz be?

Thu, 03/08/2012 - 07:05 | 2235277 GetZeeGold
GetZeeGold's picture




Screw the trolls.......screw the margin calls.


Just keep the damn gold.




Thu, 03/08/2012 - 00:11 | 2234710 Abitdodgie
Abitdodgie's picture

MDB you say that gold is usless but then you want them to use it at a security for the ECB, you cannot fix stupid, as long as you don't have any thats all that matters.

Wed, 03/07/2012 - 21:37 | 2234430 zaphod
zaphod's picture

One of the best replies to this type of nonsense I've seen...

Wed, 03/07/2012 - 18:51 | 2233918 AC_Doctor
AC_Doctor's picture

MillionDufusBoner, you ignorance is outstanding.

Thu, 03/08/2012 - 00:53 | 2234835 economics1996
economics1996's picture

Feeding the troll.

Wed, 03/07/2012 - 18:53 | 2233929 Al Huxley
Al Huxley's picture

Why don't they just split from the union altogether, and take back control of the ability to print their own currency.  Then under Modern Monetary Theory (MMT) they'd just print their way to wealth.  Given that possibility you have to wonder why they ever joined the union in the first place.  The more I read about MMT, the more magical it seems /sarc

Wed, 03/07/2012 - 18:57 | 2233943 seek
seek's picture

Probably your most enlightening sarcasm yet, MDB.

I'm struggling with how to reward this, upvote because I like it ot downvote because you're probably looking to that number as your success indicator

Wed, 03/07/2012 - 18:59 | 2233951 eddiebe
eddiebe's picture

Two reasons come to mind. If they pledge the gold, they will lose it to the banksters printing, and two, they know full well that if they acknowledge gold publicly, they loose the power to print, which is a pretty lucrative endeavour.

Wed, 03/07/2012 - 20:02 | 2234175 DCon
DCon's picture

Is that you Warren?


Wed, 03/07/2012 - 21:29 | 2234403 chump666
chump666's picture

If the IMF/EU lead cartel, backstopped by an insane Italian via the ECB, purge/steal the PIIGS and other EZ gold reserves.  100% lock in an armed conflict/acts of terror within the EZ/EU.  No doubt there at all.

Greece gets pillaged again by 'other' European entities and it's assets (gold) is ripped off by the IMF.  Don't holiday in Greece unless you want to be kidnapped and used as collateral/ransom by various groups.  Europe is taking a turn back into it's dirty sh*tty past.

Wed, 03/21/2012 - 14:15 | 2277265 MeelionDollerBogus
MeelionDollerBogus's picture

I struggle with the idea of pledging useful things like gold or land as collateral. As long as useless bonds that won't ever be paid are accepted as collateral just make more of those & send 'em out the door.

Wed, 03/07/2012 - 18:40 | 2233871 Sudden Debt
Sudden Debt's picture

Gold has become the derivative from the paper gold where it used to be the other way around.
In that point of view, the paper woth 1/100 of the fiat it's traded in and can't be used as collateral in any way.
Next phase is that the bullion will set the price of the paper and will witness some form of delution which will cause the bullion price to skyrocket and the paper to implode.
The price of paper is also so manipulated that they keep printing more contracts Pushing the price of the contracts zimbabwe style.

Same for silver where the paper now trades at 269 to 1. Thats about a year production per day that's sold and printed into existence. So the price for silver should mathematical be between 8600$ and 32$, give or take 4000$ at this moment and not including the future QE's that will delute the dollar much more.

Wed, 03/07/2012 - 19:28 | 2234045 Reptil
Reptil's picture

very lucid observation, thank you.

Wed, 03/07/2012 - 21:54 | 2234456 Manthong
Manthong's picture

There is a peak silver argument that holds water and considering the consumption and irreplaceability of silver in certain industrial applications, an argument can be made that silver could ultimately be priced at a higher value than gold in whatever trade units eventually supplant the FRN.

Wed, 03/07/2012 - 23:52 | 2234673 trav7777
trav7777's picture

eh...demand will get crushed at prices like that.  Soon as silver peaks, it will do the same thing as gold.  Hell, it may already have happened and the 5x price rise since the bygone days of $6/oz may be in part due to that.

There simply haven't been enough dollars printed to justify this level of inflation.

Thu, 03/08/2012 - 00:35 | 2234765 battlestargalactica
battlestargalactica's picture

But... But... this assclown says otherwise:

"...Based on history, a big move in silver prices is likely afoot. And given silver's 27.8% rise in price already this year, the lack of additional stimulus and steadily improving economic conditions in the United States, the most likely direction of that move is down."

To flog yourself with gold brick wrapped in a lemon, see more here:

SARC ON>: Volume! Don't we PM bugs get it?!? It's just about volume on COMEX and SLV. It's just about paper VOLUME. There are no other factors at play here... cuz... cuz... the ecomony is improving!

Wonder how many anti-PM assclowns you can fit in a Volkswagon these days... and still be able to push it off a cliff.

Wed, 03/07/2012 - 18:10 | 2233782 Mongo
Mongo's picture

The collapse will be like an orgasm because this has to stop...

Wed, 03/07/2012 - 18:22 | 2233819 SILVERGEDDON

The collapse will be like a nymphomaniac riding a vibrator plugged into 110 household volts - it ain't gonna stop until the house wiring shorts out and burns the whole fucking house down. Multiple orgasms of volatility ad infinitum bitchez ! Buy the fucking dips with flammable paper dog shit fiat, bonds, CDS's,  and stock certificates. Buy copper, lead, diesel, food, seed, land, and a future.

Or, burn in a paper hell of your own investing. Remember 2008 ? Market tanks over the antics of one insurance company. WTF do you think is gonna happen when more countries default, pushing all the fucking greedy banksters and their paper house over a cliff, on fire ?


Wed, 03/07/2012 - 18:35 | 2233854 chump666
chump666's picture

hahahahahaha.  " a nymphomaniac riding a vibrator plugged into 110 household volts - it ain't gonna stop until the house wiring shorts out and burns the whole fucking house down. Multiple orgasms of volatility ad infinitum bitchez !"

I love it. 

Wed, 03/07/2012 - 18:44 | 2233889 Manthong
Manthong's picture

Um.. maybe something a bit more industrial is warranted,,

and leave it up to an esteemed higher education institution to provide it.

Wed, 03/07/2012 - 18:51 | 2233920 Sudden Debt
Sudden Debt's picture

I wonder if it's ISO certified....

Wed, 03/07/2012 - 19:00 | 2233957 BidnessMan
BidnessMan's picture

Or MIL-STD 810F certified.  Learn so many interesting things on ZH.

Wed, 03/07/2012 - 19:10 | 2233991 Silver Pullet
Silver Pullet's picture

Or MILF approved at least...

Wed, 03/07/2012 - 19:15 | 2234009 jimijon
jimijon's picture

Ah yes my Almamater! They always had one or two great classes a year.

Wed, 03/07/2012 - 19:45 | 2234114 Tompooz
Tompooz's picture

Blythe riding. :-)

Wed, 03/07/2012 - 20:08 | 2234196 chump666
chump666's picture

Jung would look at as a nymphomaniac female being the destroyer of worlds or a throw back to Judea/Christian teaching that women are evil.

I love evil women.

Wed, 03/07/2012 - 20:24 | 2234262 Goldilocks
Goldilocks's picture

Electric Light Orchestra- Evil Woman (4:22)

Wed, 03/07/2012 - 20:35 | 2234292 chump666
chump666's picture

oh F*ck ELO!!! You legend!

Wed, 03/07/2012 - 23:50 | 2234670 TheFourthStooge-ing
TheFourthStooge-ing's picture

Spooky Tooth - Evil Woman


Wed, 03/07/2012 - 19:29 | 2234048 Schmuck Raker
Schmuck Raker's picture

+1 Butchness bitchez

+10 With chaps

Wed, 03/07/2012 - 18:10 | 2233783 Attitude_Check
Attitude_Check's picture

From weak hands to strong hands.

Wed, 03/07/2012 - 18:14 | 2233797 ReallySparky
ReallySparky's picture

Love that attitude.

Wed, 03/07/2012 - 18:13 | 2233791 jcaz
jcaz's picture

Just selling their winners to cover the calls.....  Prolly phoning Beth in the back office, trying to squeeze an extra day out of her......

Wed, 03/07/2012 - 18:14 | 2233796 redpill
redpill's picture

It's darkest before the dawn, and the sun hasn't even set yet.  Just wait until the screws really get turned to get the peasants to turn over the yellow stuff.


Wed, 03/07/2012 - 18:49 | 2233911 Zero Govt
Zero Govt's picture

there is a short circuit to the Monopolist Matrix:

Stop Paying Your Taxes (peasants, don't feed the suckers)

Thu, 03/08/2012 - 08:41 | 2235408 Mesquite
Mesquite's picture

Don't know best place to insert this...Guess here will do..

I note on the list of top ten gold holdings--Russia up, Germany down

    (over last year, or so..)


Wed, 03/07/2012 - 18:14 | 2233799 navy62802
navy62802's picture

Does it even matter for the longs? Short-term, this kind of analysis may be valuable, but for the long-term holders, this is just noise. We all know what's going to happen over the next 5-10 years ... central banks are going to print. Which means that the value of gold and silver will only increase. Any other questions???

Wed, 03/07/2012 - 18:16 | 2233803 Pladizow
Pladizow's picture


Wed, 03/07/2012 - 18:33 | 2233849 LowProfile
LowProfile's picture

Unless you have cash to buy more!

Wed, 03/07/2012 - 18:15 | 2233802 SeverinSlade
SeverinSlade's picture

I am sure turd and his technical analysis will completely ignore this and tell everyone that gold is on its way to 2000 and silver to 40 by tomorrow

Wed, 03/07/2012 - 18:18 | 2233809 tekhneek
tekhneek's picture

So stop reading it?

I know I never paid much attention to his chart drawings... nothing against the guy, I just thought it was a fool's errand drawing lines on a chart then screaming about manipulation in the same breath. Waste of time and energy in my opinion.

Stack stack stack, bitchez. There's your chart.

Thu, 03/08/2012 - 00:27 | 2234739 WonderDawg
WonderDawg's picture

Or, take your chances and wait a little while, see if the price does indeed drop (I think it will, but I've been adding a little to the stacks anyway, as I've been wrong before). Either way, PMs need to be a part of your plan, IMO.

Tekhneek, I know you're a dude but for the longest time thought you were a chick because of your avatar, and still read your posts as if they're coming from a female before catching myself. I know others have made the same mistake. Not telling you what to do with your avatar, just letting you know. Food for thought. Dude.

Wed, 03/07/2012 - 18:16 | 2233804 mayhem_korner
mayhem_korner's picture

MtM losses combined with collateral calls (as we noted earlier) was never a recipe for success


Had folks "jumping for joy" in 1929, no?

Wed, 03/07/2012 - 18:19 | 2233812 Sweet Chicken
Sweet Chicken's picture

This post only matters is you are dealing with GLD NOT if you own GOLD.


Physical bitchezzz

Wed, 03/07/2012 - 18:26 | 2233836 zorba THE GREEK
zorba THE GREEK's picture

Once gold has been moved from weak hands to strong hands, the price

will be allowed to rise. So I say " Bring it on. "  Do your thing manipulators, 

you are too big to stop, especially since you are backed by central banks.

Once you are done and most of the gold is in strong hands, gold will go to

levels that will surprise almost everyone because it will be the only real money

left standing.

Wed, 03/07/2012 - 23:58 | 2234683 trav7777
trav7777's picture

huh?  Have you opened your eyes?

How many "weak" hands can even afford one ounce?  You have to be a baller to really even think about plunking down $1750 for a coin.  Most people would look at you like yer crazy, how the fk could you spend so much on something like that??  they don't get that it's worth what you paid for it the next day and after, unlike the shoes or TV they think is an equivalent purchase.

Price being high is migrating it to stronger hands as Cash4Goled schemes proliferate.  The price being where it is causes gold to get out of weak hands, chains, rings, etc., to those who have more wealth.  It is this high price that has chased in more supply that the mines can't provide.

The effects on gold supply of price and inflation are *probably* what the bankers think will happen with oil.  The problem is that we can't change our plastic shit back into combustible hydrocarbons

Wed, 03/07/2012 - 18:26 | 2233837 zorba THE GREEK
zorba THE GREEK's picture

Once gold has been moved from weak hands to strong hands, the price

will be allowed to rise. So I say " Bring it on. "  Do your thing manipulators, 

you are too big to stop, especially since you are backed by central banks.

Once you are done and most of the gold is in strong hands, gold will go to

levels that will surprise almost everyone because it will be the only real money

left standing.

Wed, 03/07/2012 - 18:33 | 2233841 vegas
vegas's picture

What the gold market really needs is for JPM & HSBC to get massacred with their shorts. You know, like AAPL taking their $80+ Billion in cash and saying, "Hey, I think we'll put it in bullion and skip the 1's and 0's of fiat." Someday, some large corproate player is gonna get religion about the PM's, and once that happens others will follow. This is my "black swan" event in the year or years to come.

Wed, 03/07/2012 - 18:56 | 2233937 Al Huxley
Al Huxley's picture

When you own the casino, make the rules, and can change those rules whenever it suits you, it's hard to ever get massacred.

Wed, 03/07/2012 - 18:59 | 2233954 Alea Iactaest
Alea Iactaest's picture

That will never, ever happen. There is no way a corporation is going to authorize PMs on its balance sheet. The corporate bylaws probably won't allow it, the board of directors probably won't allow it and the shareholders probably won't allow it. If you, as a shareholder, want PMs that's entirely your choice... either sell the company and buy, or reinvest with dividends. Does this seriously pass for analysis on ZH these days?

Wed, 03/21/2012 - 14:04 | 2277236 MeelionDollerBogus
MeelionDollerBogus's picture

Once upon a time companies had gold-clauses, settlement around inflation using gold.

I question if gold will serve this role again. It "should" but fuck "should" these are markets we're talking about.

Now land & oil, I can see clauses like that in the future.

Wed, 03/07/2012 - 18:33 | 2233846 bbq on whitehou...
bbq on whitehouse lawn's picture

At least it looks like some market players are front running this. Still the story seems incomplete. Did the banks sell in the first place, did they buy back.

It is something to consider all and all and I thank you for the heads up.


Wed, 03/07/2012 - 19:10 | 2233858 slewie the pi-rat
slewie the pi-rat's picture

the chart i saw said the ECB may call for increased collateral

hopefully, when there is some news about this, we will get more facts

until then, it lQQks like there were some "accounting changes" but again, w.out more info, there is just a "deterioration" in asset valuation" apparently showing in that graph from the previous article

until there is factual evidence that any bank or banks have received "margin calls", just maybe it might be ok to assume they haven't, at least yet, or that if they have, the actual info will be forthcoming when it is prepared for retail consumption [after all priveliged insiders have the info, if there is any]

the EBC may just be trolling some general info due to non-cash accounting entries, for now, imo

maybe the ECB will just w/draw all the recent liquidity. lock it in the vault, and throw away the key

but they haven't yet, as far as wer know

so:  consult crystal ball or just wait and see

i'll get in the second line and wait line,  those who guessed correctly can prepare their acceptance sppeeches for the adoration they will receive from "knowing" the ECB's "secret play", probably just as soon as that liquidity actually starts drying up a bit more...

yaeah...that one! 

the french, italian, irish, and spanish bonds did pretty fair last week (wink, wink), and the banks got a nice "price " for any i,i,s, and a point less un the portuhuese debt they "turned in for 3 years" for -.25%  interst expense, on a shitload of corpo-fascist worries

this info is from Financial Sphere Weak Links  and is the data all the way from last week, BiCheZ!

  1. Ten-year Portuguese yields surged 101 bps to 13.42% (up 65bps y-t-d)
  2. Italian 10-yr yields ended the week down 58 bps to 4.89% (down 214bps)
  3. Spain's 10-year yields fell 15 bps to 4.89% (down 15bps)
  4. German bund yields declined 8 bps to 1.80% (down 3bps)
  5. French yields sank 17 bps to 2.78% (down 36bps)
  6. French to German 10-year bond spread narrowed 9 bps to 98bps
  7. Greek two-year yields ended the week up 753 bps to 206% (up 8,100bps)
  8. Greek 10-year yields jumped 127 bps to 33.33% (up 202bps)
  9. U.K. 10-year gilt yields dipped one basis point to 2.14% (up 16bps)
  10. rish yields were little changed at 6.81% (down 145bps)

this is pretty close to what phe piigs "collateral" was "worth" from the discount-reate point of view for last week's LTRO, imo

we'll know more later, but we really don't know more now about any actual margin calls as of [paste]::

Wed, 03/07/2012 - 20:55 | 2234260 slewie the pi-rat
slewie the pi-rat's picture

these bonds have diff values depending on who "owns them" and they're now collateralized to the ECB

maybe for "accounting" purposes, the ECB now is gonna m2m and not pay face value due to the difference in "accounting" between the ECB and any of the 800 participating banks

so perhaps the "lines of credit" or however we conceive of this right now, cash-wize, will be m2m for terms of LTR0 "draw-down" b/c of 'Collateral accounting differences' aroun=d the ECB and how these banks were valuing these "bonds" while they "owned them free & clear" [leapYearDay!] a whole week ago and the zombies had not marked them down yet

this is the systematic m2m mark-down of sovereign debt as per basel 3 and the banks get to hold some cash over it, ^liquidity^ too.  this debt is now screwed down pretty tight compared to quite recently, imo

here the mark-down is ECB-centralized and that's that!  see yesterdays chart!

the check's in the mail and its not too huge, but the banks are getting a "haircut" here on the near-free money/credit proceeds of LTR02 imo and maybe are "weaker" but maybe it also depends on how ya look at this archetypal "re-fi" program

now, we may have shark-like feeding in the "bank consolidation" pool

in terms of the game, the ECB is "holding" the piigs paper and 800 banks are cashing out at those prices implied above?  for 3 years

the game is afoot

that spike was a well-designed seismic "liquidation" accounting adjustment, BiCheZ!  and possibly w/out any huge net negative "market" shock.  the market may still be pricing in the possible increased subordination of its "holdings" but if they read zH, they woulda done it b4 christmas!

trading zombie credits is the best i can come up with overall...  the cash value/loan value of the IOUs now equals the market value of the IOUs, or perhaps this is just the first stop of many?  LoL!!!  

how the 800 banks handle this and their CDS accounting-wize is on their balance sheets will be interesting, imo; when these lenses align, the dawning of the spring equinox will reveal the prismatic hologram of true marchMadness known as theSweet16

Thu, 03/08/2012 - 00:07 | 2234705 RockyRacoon
RockyRacoon's picture

You da man, Slewie... er, da rat.

Wed, 03/07/2012 - 18:39 | 2233866 pleseus
pleseus's picture

ECB Margin calls the second Bernake speaks causing a collapse in the Gold price?  Is that it?

Doesn't matter.  Gold going from the weak hands to the strong.  You need that for the bull market to continue.

Wed, 03/07/2012 - 19:22 | 2233887 tickhound
tickhound's picture

So, and in other words, is the HSBC to JPM, and the JPM to HSBC metal leasing circle jerk set to continue?... just at a higher rate?

Edit & from last week:

Wed, 03/07/2012 - 18:53 | 2233928 eddiebe
eddiebe's picture

Thanks for that post. It helps to figure that when gold gets sold off it isnt just a manipulation but also a growing pain for gold as some of the big boyz come to the realization that it is THE

monetary asset to hold. Once that becomes mainstream again, watch gold going parabolic.

Wed, 03/07/2012 - 18:54 | 2233933 devo
devo's picture

Could be an amazing buying opportunity.

Wed, 03/07/2012 - 18:54 | 2233934 widget
widget's picture

Rumor (Eric King's "London source") has it that "a sovereign" stands ready to pick up the physical if price drops, and did so yesterday with 40+ tons.

Wed, 03/07/2012 - 19:16 | 2233997 DavidPierre
DavidPierre's picture

 If there were PhD's given in the study of gold manipulation everyone at LeMet would have one.

 It's so blatant what they do, and repeat over and over. After the engineered takedown gold once more is forced to check up today at a measly 1% gain. You could watch real time the pre-programmed wall of algo sell stops set up just ahead of $1,688, or +1%.

 Computer algo systems have given the Cabal a superior tool in the art of control. It is no coincidence that the daily manipulation has intensified the past few years with the advent of the algo systems. Algos now smooth out and seamlessly deliver manipulation 24/7. There's rarely any surprises or getting caught off-guard when pre-programming is in place. The two daily objectives for the Cabal are always to quell excitement, and manage the retreat.

 The only way to defeat the algos is to take physical off the market. Algos love paper opponents, and loathe physical buyers.

 As long as the hedgies line up to make their scheduled sacrifices to the algo Gods the Cabal computers work like a charm. Scarcity of the real stuff will always be the Cabal's kryptonite. Last August showed what happens when they're scrambling to get their hands on the shiny. Another run can't happen quick enough.

Gold and Silver get crushed first after Bernanke speaks about no more QE, and then they do this. How many do you think in the mainstream gold world, or mainstream financial press, will make the connection and go there?

Wed, 03/07/2012 - 19:12 | 2234000 sheepgetslaughtered
Wed, 03/07/2012 - 19:14 | 2234005 Piranhanoia
Piranhanoia's picture

This is where it doesn't make any sense.  Why would a sovereign nation give up gold when it may be the standard of their currency after they default?   They come roaring back if they keep the gold,  they wither if they don't.   Am I missing something?



Wed, 03/07/2012 - 20:06 | 2234188 Miss Expectations
Miss Expectations's picture

Is gold the last refuge of the scoundrels?

Wed, 03/07/2012 - 21:37 | 2234427 Dr.Engineer
Dr.Engineer's picture

It seems you need to play this two ways.  First play would be to move paper into really backed paper.  For example, I have an IRA and I'm buying Sprott's stuff because it looks like it is actually backed by physical.  It is also in Canada and Canada will turn off the oil if the US invades.  Anyone know different about Sprott?

Now with my real cash flow I buy physical and pay down debt.  I am keeping my powder dry because the price needs to drop once the ECU is FU'ed.

Other than guns, ammo, and food, what else should be done?

Thu, 03/08/2012 - 00:57 | 2234845 AmazingLarry
AmazingLarry's picture

Interesting. My lease rates are way down.....I'm talking 40"...just below the frost line.

Thu, 03/08/2012 - 03:17 | 2235085 cnhedge
cnhedge's picture

 gofo-libor still supports gold

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