Posted on 10/03/2011 8:24:38 PM PDT by Nachum
Earlier today the CME did something quite contrarian to its nature: it validated gold by a factor of 150%, when it announced that the amount of gold bullion that customers can post as collateral is increasing from $200 million to $500 million. To confused NYU adjunct economics professors this means that the credibility of gold in the global monetary system just increased by more than ever before. Regarding the stated reason for this move "the Chicago-based company said that the change will allow market participants to better manage their risk and to take advantage of lower gold lease rates." As for the real reason for this surprising move we are unsure: whether it is due to an actual shortage of dollar dollar bill margin as collateral or some other reason we don't know. In fact, we are confident the CME will likely hike gold margins once again as soon as gold approaches $1900 shortly. But at least it has finally tipped its hand as to how even the biggest US futures exchange feel about the yellow metal. Of course, the end result is that should gold, just as cash, be used to collateralize stupid transactions which result in margin calls, the collateral will be confiscated. Therefore, one would be forgiven if one assumes that this is merely a ploy to more than double the amount of perfectly legally confiscatable gold in the capital markets. Which of course would mean that someone, somewhere would be interested in procuring far more physical gold than is already in possession. But that's just crazy talk. Why would one want gold, especially at these near record prices, when one can have glorious spam?
(Excerpt) Read more at zerohedge.com ...
Full title: Is The CME's 150% Hike In Gold Collateral Just A Ploy To Increase Amount Of Legally Confiscatable Gold?
And it might just be that simple.
Goldbug ping
Like most of the rest of the stock market, if you saw a machine that was oscillating as wildly as the gold market is these days, you would run like hell and get as far away from it as you could.
“the amount of gold bullion that customers can post as collateral is increasing from $200 million to $500 million”
Let me answer this riddle for you.
With the price rising, they would have to give gold back to the depositers who deposited $200M a couple of years ago. This ensures they do not have to do that.
What would be the best way to use gold as colatteral for a stock account? Is there any outfit that would take and hold it to fund a margin account.
No doubt there’s a whole lot of manipulation going on in all markets
But when it all crashes, in the end with stocks you have a piece of paper, with Gold you at least have a physical asset in your hands
yeah, yeah I know, you can’t eat Gold blah blah blah
I understand and agree with your points, I was merely reflecting on what a damned wild ride the commodities markets are right now, and not just gold. I doubt there is much day trading going on in gold right now and a lot of the wild swings are probably due to hedge funds trading foreign debts.
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