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<p>[QUOTE=&quot;NorthKorea, post: 2235845, member: 29643&quot;]I think interest rates (as far as this specific aspect is concerned) affect on PM prices are a net zero scenario. Basically, the PM markets get shorted by selling futures contracts. The contracts are priced to market daily, and the profit/loss are credited/debited, accordingly. Unless the seller of the contracts is cashing out their profits daily, they aren&#039;t paying any margin interest, since they aren&#039;t on margin.</p><p><br /></p><p>Example:</p><p><br /></p><p>Account sells 1000 Dec 17 contracts of a brick of gold (100 Troy Ounces) priced at $1200. The contract settled at 1151 today, so as of today, the seller account holds $4.9mm and is net out 1000 contracts.</p><p><br /></p><p>Until the price of gold exceeds $1200 or the holder sweeps the cash, there would be no margin. In fact, with interest rates raising, the seller has additional incentive to hold the position, since they&#039;ll profit from the drop in price of the underlying asset AND additional interest on the cash position.</p><p><br /></p><p>The maintenance requirement is met by the cash in the account. If interest rates continue to rise, the price of gold will continue to drop. The effect of short cover will only happen once interest rates exceed the investor tolerance for zero risk. So, basically, until interest rates are high enough for the holder to believe they will make more in cash, short positions will be held onto. Eventually, this will lead to further drops in the price of gold, as buyers will stop buying, opting for safety, instead, in cash. This will cause further drops in the price of gold. Eventually the price will flatten out or interest rates will stabilize. That&#039;s when short covering will cause a dramatic price shift, but not before that.[/QUOTE]</p><p><br /></p>

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