http://www.kitco.com/news/2013-11-22/CME-Group-Lowers-Gold-Silver-Copper-Margins.html So I am wondering how many PM "gurus" will be talking about this action? They sure as heck blasted the increase in margin requirements as "blatant manipulation" and "proof" that pm markets are manipulated against buyers, right? So would this lowering of margin requirements be trumpeted as "proof" the CME is trying to manipulate markets in favor of buyers? Or maybe, just maybe, margin requirements are simply set both up or down simply as a market mechanism to protect the exchange based upon volatility, and have nothing at all to do with "market manipulation"?
Their philosophy has been that the margins represent changes in volatility whether up or down. It has been the bullionists that have claimed it is only raised when prices rise , but never lowered in the other direction. Since the PM bull run was rather steep and long, it probably seemed so to PM " enthusiasts". Some could see this as manipulation to raise the demand again, but the CME, like sport betting, has to change the point spread , in order not to be caught on the far side of a balance. Yes,those who have the money and the "knowledge" that PM are the best for the time, can more easily control bull PM contracts for less. Others will see that the CME is expecting little volatility on the up side and more volatility on the down side and will stay away. IMO.
No idea. I just posted it since a LOT of people made a HUGE deal when they increased the margins when silver was higher. I simply wanted to post for people's education that margin requirements also move lower, when there is lower risk in the market. The purpose of margin requirements is for the CME, not for anyone buying or selling. The CME has to make everyone whole, so they have to ensure there will also be money there to settle. When markets are more volatile, mathematically this requires higher margin requirements. When markets are very steady, such levels of margin are not required. Like a lot of my other posts, its intended to educate people how markets really work, so they are not misled in other market conditions that every action must by definition be "manipulation".
You're not telling the whole story, again. You know perfectly well that the price of silver was falling dramatically when they raised the margin requirement back in June. Come on man, I don't have any issue with you trying to expose the gurus for what they are, I do take issue with you not stating what you know, or twisting it to make it look better for your purpose.
I do? June 2013? I honestly do not recall that. My only point of these articles is to show people margin requirements change, and not only when people can claim its manipulation. Markets have activities all of the time, and maybe if people followed them more often, and not just when pm is booming, they would have a different view of margin changes and be less likely to succumb to sensationalistic stories. Btw, I never claimed this was the only margin change over the last few years, simply posting an article showing margins change when pm euphoria is not present. I would say people might want to see if this is covered as emphatically by pm websites as the increase a few years ago was.
I don't think that more than a score of our members even knows when the margin does change unless a gold bug blog or bullion seller uses the news them selves. Ask , did you read it on the financial news, or on kitco or other bullion site?
It could mean the market makers have alot of stagnant inventory sitting in CME warehouses piling up storage costs instead of generating leasing revenue. Could it not?
I think medoraman wasn't looking for additional comments on why this is. He would be happy if the amont of views would be high and the reply's were at zero. It's awareness he is trying to create not so much opinions.
I am fine with any comments sir. Things like what Justafarmer said could be true, maybe its the cme selfishly trying to generate more volume. Any and all comments are fine, my only goal was to have people think and discuss these points outside turbulent times, and show them such actions are part of normal market operations. I was a college professor, so old habits die hard. Education and research in an unpressured environment is my only goal, and unfortunately such things are only ever brought up on such boards when the author can use it to convince you of something. I am not trying to convince anyone of anything, simply asking them to think about it now when such actions aren't being debated in the pm media.
I gave no opinion - just providing awareness of a scenario where margins could be lowered for a reason other than risk.
Any amount margin is fraudulent, as it is buying with money you don't actually have. Now that they're allowing for more fraud, we should applaud? I'm not defending so-called the PM gurus. They are hit or miss, with the good ones few and far between, but I certainly wouldn't be trying to defend the people who created the situation that they profit from either, and if I were I wouldn't do so by pointing out that they are inviting leverage into an over-levered market. But this is how they scare people out of metals. Invite the leverage, let it run up, then make sure everybody is watching for the smackdown. The volatility makes for some nice HFT algo profits to boot. I would add that hiking margins 5 times in a week like was done in May 2011 is excessive. The fact that that 'needed' to be done simply emphasizies that the people in charge of controlling margins are inadequate at what they do, assuming that they are not malevolent.
