CME Continues to Attempt Gold Price Manipulation

By Roger Baettig | August 11 2011 5:08 AM

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CME raises Gold margins, prices continue to rise

The US exchange operator, CME Group Inc. (NYSE:CME) said late Wednesday it is raising the margin requirements for trade in a wide range of Gold products, effective Thursday.

The speculative margin requirement for a new position in Comex 100 Gold futures will rise to $7,425 from $6,075, or to $5,500 from $4,500 for existing " current maintenance" margins.

Nevertheless the benchmark Gold futures extended their rise in the wake of the announcement.

Comex Gold for December delivery rose to 1,807 ox from its 1,784 oz New York settlement level Wednesday, ahead of the CME announcement.

It will cost more to trade some of the active foreign exchange and interest rate futures contracts at CMEGroup Inc. due to a rise in market volatility.

Margin requirements are being raised in 19 forex markets, including the Japanese yen and Swiss franc. Investors have considered the 2 currencies as a safe haven while the Global economy has weakened, and Standard & Poor's stripped U government debt of its prized triple-A credit rating.

For long-term Treasury futures, it is the 2nd time in the past 2 1/2-wks that CME has increased collateral to trade the contracts.

Despite the ratings downgrade, US Treasury prices have soared, as the US Federal Reserve announced that it is likely to keep the short-term federal-funds rate near Zero until at least the middle of Y 2013.

The changes take effect at the close of business Thursday. In a memo to traders issued Wednesday evening, the exchange operator said it is raising margins after a "normal review of market volatility to ensure adequate collateral coverage."

Some market participants have argued that similar increases heighten tensions and create even more volatility.

CME's action does not account for any boost in margins imposed by individual clearing firms.

For the Japanese yen, CME is raising initial margins for speculative traders by 20%, to $4,388 per contract. Initial margins for hedgers and CME members will also rise by 20%, to $3,250 per contract.

Initial margins will jump 30%, to $5,400 per contract, for speculative traders of the Swiss franc. Hedgers andCME members must pay an initial margin of $4,000 per contract, also up 30%.

In US Treasurys, it will cost speculators of 10-yr T-Note futures an initial margin of $2,160 per contract, 19% higher than the current fee, and 31% above the collateral requirement imposed on July 26.

The late July increase was imposed before the White House and Congress reached an agreement to extend the US debt ceiling, averting a default on the government's payment obligations.

Since then, initial margin requirements will have increased 27% for CME classic and ultra Treasury Bond futures.

Classic Treasury Bond contracts cover maturities of between 15 and 25-yrs. Ultra Treasury bonds cover maturities longer than 25 yrs.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.

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