The Shanghai gold exchange demonstrates that unlike in the US, where margin hikes only go one way, following a surge in volatility which results in margins getting hiked, once said volatility declines, margins usually are cut. According to a press release from the exchange issued overnight, the Shanghai Gold Exchange said it will lower margin requirements for silver to 15% from 18% after the close of business Monday if there are no sharp price movements during the day. It will reduce upper and lower limits to 10% from 13%, effective Tuesday, if Monday's intraday trading doesn't hit either limit, the exchange said in a statement on its website. This is the second margin drop at the exchange following a comparable one last week when margins peaks at 19% only to see a 1% decline. For those not versed in math, this is a whopping 20% drop in silver margins over the span of two days. In the meantime, the crickets from the CME continue, and in fact we are hearing rumors of more margin hikes from the Chicago boys.
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The bourse has been adjusting trading margins and both upper and lower limits in recent days as part of its normal operations in monitoring and curbing price volatility.
On Friday, it said the margin requirements will be eased to 18% from 19% but that it would keep upper and lower limits at 13% after raising them from 10% on Thursday.
On Thursday, it said trading margins would be hiked to 19% from 18% and upper and lower limits raised to 13% from 10%, effective Friday. That was the fourth set of changes since May 6, as the Chinese exchange for gold and silver spot trading has been making adjustments in response to price movements in global precious metals markets, which are a major driver of local prices.