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To: org.whodat
Anyone dealing in gold futures instead of the real stuff is an idiot.

A speculator who puts up $9450 initial margin makes $9450 with a 5% increase in the gold price. That is why speculators use gold futures - 20 to 1 (or more) leverage. By comparison, someone who buys the "real stuff" only makes $472.50 from a 5% increase in the gold price. The reason initial margins go up? If a gold futures contract goes down 10% in a day ($18,900), and that speculator cannot put up additional margin, the futures exchange has eat the $9450 loss, which has to be paid out to a speculator who is shorting gold. Note that any increase in initial margins applies to both the long and the short side - both buyers and sellers of gold futures have to put up more up-front money to make their bets. This means it is more expensive to go long, but it is similarly more expensive to go short, something that Durden leaves out in his misleading screed about the CME attempting to drive gold prices lower.

9 posted on 08/24/2011 3:36:50 PM PDT by Zhang Fei (Let us pray that peace be now restored to the world and that God will preserve it always.)
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To: Zhang Fei

Duh, if the world went to hell, you will not be able to trade that piece of paper for an old can of beans.


10 posted on 08/24/2011 3:54:52 PM PDT by org.whodat (What does the Republican party stand for////??? absolutely nothing.)
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