From Barrons,
The CME Group (CME) on Friday raised margin requirements for some gold, silver and copper futures contracts. The hikes will be effective after the close of business on Monday, according to the exchange operator.
Initial requirements to trade and hold gold’s benchmark contract rose 21% to $11,475 per contract. Meanwhile, maintenance margins climbed to $8,500 from $7,000 per contract.
At the same time, initial requirements for silver rose 16% to $24,975 a contract and maintenance margins increased to $18,500 from $16,000 a contract.
Initial requirements for copper jumped 18% to $6,750 per contract, from $5,738. Also, maintenance margins were increased to $5,000 from $4,250 per contract.
Margin hikes have been blamed by traders for curtailing rallies earlier in the year. This time around, however, CME’s attempt to again dampen speculation comes at a time when market forces are already seemingly at work doing much the same.
Here is how the gold and the precious metal markets responded.
From Barrons,
Silver futures kept heading down on Friday, finishing with an 18% fall marking the metal’s biggest drop in decades. Meanwhile, the most active gold contract in New York sank 5.9% to register its largest percentage loss since June 2006.
More from Bloomberg,
Commodities fell to a nine-month low, led by routs in metals, on deepening concern that governments are running out of tools to avert a global recession, eroding prospects for raw-material demand.
European officials may accelerate the setup of a permanent rescue fund as the sovereign-debt crisis mounts. On Sept. 21, the Federal Reserve said the U.S. economy faces “significant downside risks.” In the next two days, gold plunged the most since 1983, and copper had the biggest slide in almost three years. Today, silver posted the largest drop in 32 years…
“We are seeing commodity prices correcting, so they are more compatible with the global economy,” said Christin Tuxen, a senior analyst at Danske Bank A/S in Copenhagen. “When we have fears over the economic cycle as we have now and a higher probability of contraction, it hits industrial metals and commodities.”
“We are not predicting a recession in the Western world, but low growth for the long term,” Tuxen said. “We are looking for a rebound in China and Asia in the fourth quarter and in 2012, which will help copper and aluminum.”
Some things to note here
The current financial market carnage has been indicating of an ongoing liquidity contraction, given that Mr. Bernanke’s has thwarted expectations of further aggressive rescue policies. Yes, Bernanke’s non inflation stance is something to cheer at, but this has not been about political-economic apostasy but rather about political obstacles.
Second, the timing of CME’s intervention appears suspicious. Such needless interventions have been weighing on an already bleak sentiment.
Yet the public is being impressed upon by media and experts that this has been about economic performance. If current environment is “not predicting a recession” then the dramatic selloff in commodities would seem unwarranted, except for liquidity and or manipulation issues.
I deem this continuing series of credit margin hikes as part of the signaling channel tool employed by team Bernanke to project on the intensifying risk environment of a deflationary bust, which will be used to rationalize QEs and to quell QE policy dissenters. As stated above, I am don’t think that Mr. Bernanke has backtracked from his activist central banking dogma.
And as pointed out earlier, Mr. Bernanke appears to be implicitly challenging his political detractors by laying the recent market carnage on their doors.
My guess is that eventually the divided FOMC will accede to Bernanke’s policy preferences, but that would entail more market pressures. In other words, the global financial markets would remain hostage to, or will be used as negotiation leverage by the political class in furtherance of their interests.
But until there will be clarity in the directions of policy actions, it would be best to stay clear from the current environment whom signifies as victims of the imbroglio or the bickering of political stewards.
Nonetheless, despite the slump in precious metals, these are likely to be temporary events.
No comments:
Post a Comment