Friday, February 1, 2013

Golden and Margin Requirements Redux


Wary silver investors may be wise to think about a pre-election margin test dive. Especially if silver's swiftness gets too frothy or starts dragging the cost of gold up along for it, since such events may signal the reemergence produced by unpopular inflationary pressures.

The Chicago Mercantile Exchange or CME is a kind of self-regulated, for profit organization that sets signifies margin requirements. The CME's maintenance edges for silver futures contracts are left at relatively levels when you compare other markets, despite the precious metal's the present consolidative trading patterns seen prior to Fed's announcement of it latest QEIII package.

Lower margin requirements used to attract greater speculative trading activity as things are cheaper to establish particular futures position in terms of the capital required to be put on deposit as slack.

Due to its per-contract payment method, the CME profits more of increased trade volume. This explains why it promotes HFT or algorithmic trading as a means for providing liquidity, while at the same time blithely ignoring the heightened market probability of such automated trading follows, as well as their tendency to produce a faulty price exposure mechanism.

Higher Margins Made to Quell Volatility?

In existence, the CME shifting then it's margin requirements for silver has been used selectively to the support, but not necessarily with the rational manner that you can still expect.

For example, the CME has raised gold and silver futures margin requirements just like their prices were already dropping sharply. This rather counterintuitive tactic proved helpful in early May of the 2011, just as silver prices were coming away their historic high levels achieved in late April of that aged. Many traders believe the CME's move possess contributed substantially to you notable market crash that followed shortly thereafter.

In comparison, the CME has rich lowered - yes got better - their margin personal requirements for equities related futures contracts virtually around the board by roughly 12 percentage. This move announced in its Performance Bond memo more elderly September 20th, came due to real surprise since equity indexes along with the S& P500 have recently been approaching five year treble.

Market Manipulation Tactics

The CME's through margin requirement changes ensures they are seem like one more in a list of manipulative market 'tactics' fantastic at trigger either big sell-offs at convenient times or stimulate chronically weak markets just just before a national election.

The markets for alloys are just not deep enough to hide from manipulative behavior. Consider along the lines of, collusion among the other 3 of your 4 largest traders, who together hold nearly half of the entire outstanding Comex other words positions.

They might agree among themselves for sale initially, and then acquire their short positions back jointly with, thereby whipsawing the present. The high frequency of counter-intuitive moves or 'out your day character' price action shows that such collusion may be at work behind the scenes.

Other manipulative tools end up being the daily caps on upward price movement, but virtually no limit to how far prices can turn to the downside. This comes from the work of GATA, and in gold such price rise caps are not over 2%, but are generally set at 1%.

Furthermore, position limits that allow large speculators to foundation make up concentrated positions allow manipulation. The latest proposal adjust position limits was recently thrown out, and it remains un-answered why large banks are called commercial traders at any kind.

Financial data announcements that are potentially 'adjusted' can occasionally provoke sharp market sends.

Silver Margin Hike Sneaking?

Silver prices seem treated, with convenient crashes coming at seemingly a perfect time because the metal is included in the greater economy.

This reinforces the idea that, despite the industrial getting the club albatross, silver is still an unofficial yet ever present currency anchor.

Furthermore, the Fed's recent open up QE announcement - along with large numbers of investors waking up rrn your silver story- has created a notable rebound in alloys sentiment that is currently reflected in silver's an affordable.

Perhaps one should not be too surprised to consider another silver contract margin requirement hike around the corner from the CME.

For more articles like that, and to stay updated on the biggest economic, financial, political and market events i hope silver and precious alloys, visit http: //www. silver-coin-investor. com

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