Wednesday, August 24, 2011

CME Margin Increase Exposes Desperation Of the Naked Banking Cartel




Gold futures fell more than $100 on Wednesday, one of the steepest falls ever, as strong U.S. economic data and expectations of more Federal Reserve stimulus accelerated profit taking from the safe-haven record high of a day ago.

This is asinine! Strong economic data? What? More Fed stimulus is negative for Gold? Are you kidding me? And of course a headline with a 1980 reference to make "readers believe" that "the top is in" and Gold is going to collapse again. My sides hurt from laughing. The CME margin hike has EVERYTHING to do with Gold's "price drop" today. That, and tomorrow's September options expiration. NOTHING else!

At worst this "sell-off in Gold can be chalked up to [forced] "profit taking" by traders. No "real" Gold was sold today. As a matter of fact, I would suspect that quite a bit of real gold was bought today at a very nice sale price?

Does the Banking Cartel really believe that by knocking $100 off the price of Gold, the demand for it is going to wither and die? Good luck with that belief. Investors have been standing in line, waiting to buy "real" Gold at a lower price. Has the Banking Cartel just handed the Global Gold Investment Community a gift of lower prices on the eve of Gold's strongest buying season of the year?

Does the banking cartel really believe that a margin increases on the cost of a "paper" Gold contract is going to stem the Global demand for "real" Gold? Not a chance, it will only make it cheaper for those seeking to buy "real" Gold, increase demand, and ultimately make it harder to get delivery of, as available supply of the Precious Metal is sucked up even faster a lower prices. [Ditto for Silver]

Today's CME Gold margin increase might have been the worst kept secret in the history of CRIMEX shenanigans. This story was posted on The Street's web site at 8:24AM est this morning. A mere four minutes after the CRIMEX assault on Gold began in earnest.

NEW YORK (TheStreet ) -- High gold prices need to watch their backs because margin hikes could be right around the corner.

With gold prices seeing $20-$50 swings daily, the CME could be tempted to increase the amount of money it takes to buy an 100 ounce gold futures contract -- a technique often employed to stem volatility.

Silver was the latest victim of margin hikes and is still recovering. The CME raised margins five times between April 26th and May 9th a massive 68% which eventually resulted in silver losing almost 30% of its value in less than 3 weeks. If the same fate were to befall gold, prices could tank to $1,400 an ounce.

The CME has raised margin requirements for gold twice this year, once in January and once in early August, by 11% and 22% respectively. The moves did little to stem gold's rally. A week after the margin hikes in January gold was down just 2% and a week after the August hike gold was up 1.5%.

But this time may be different for gold. As shown in the chart above from MFGlobal, gold's average true range is 40, a level not seen since the end of 2008. The last time the CME underwent a series of margin hikes for gold was between December 2009 and February 2010 when it raised requirements 50% that was when gold's average range was in the mid to high 20s.

The Shanghai Gold Exchange beat the CME to the punch and raised margins Tuesday by 1%. The last time the exchange increased rates was August 8th, three days later the CME hiked requirements by 22%.


Following today's plunge in Gold prices, the CME decides the Gold market is too volatile, and raise margin rates further.  And just like with the May margin hikes in Silver, the CME waits until prices are falling to raise margin rates, and use "the volatility" as an excuse for doing so.  This is patently absurd.  Gold fell because of the threat of a margin hike by the CME following a margin hike by the Shanghai Gold Exchange.  The exchanges create a "volatility issue" and then react to it?  Where were the margin hikes when Gold was rising $50 a day?  This margin increase today, and those in Silver back in May, are obviously for the purpose of protecting the Banking Cartel's massive short positions in the Precious Metals, and have absolutely nothing to do with "volatility".

By Debarati Roy and Pham-Duy Nguyen
CME Group Inc. raised the margin requirements on gold trading at its Comex unit for the second time this month, after prices surged to a record above $1,900 an ounce and then plunged today by the most since March 2008.

The minimum cash deposit for borrowing from brokers to trade gold futures will rise 27 percent to $9,450 per 100-ounce contract in the speculative Tier 1 category at the close of trading tomorrow, Chicago-based CME said in a statement. On Aug. 11, the increase by the exchange was 22 percent to $7,425. The cost of one contract after today’s close was $175,730. The maintenance margin will rise to $7,000 from $5,500.

Comex is making it more expensive for speculators to trade the metal as open interest for gold options climbed to a record 1.263 million contracts on Aug. 18 and prices slumped more than 7 percent in two days, erasing the gain of the past two weeks that sent the metal to a record $1,917.90 yesterday.

“It will add selling pressure, even after today,” Frank McGhee, the head dealer at Integrated Brokerage Services said in a telephone interview from Chicago. “This is the exchange reacting to the volatility.”

The CME last raised margins on Aug. 11, when prices fell 1.8 percent, the biggest slump since June 23.

Today, gold futures for December delivery plunged $104, or 5.6 percent, to settle at $1,757.30, the biggest decline for a most-active contract since March 19, 2008.

“There will be a short-term impact on gold prices,” Savneet Singh, the chief executive officer of New-York based Gold Bullion International, said in a telephone interview. “The long-term fundamentals are intact.”

"...the biggest decline for a most-active contract since March 19, 2008."  That's odd, why did the headline above declare "Biggest Price Drop Since 1980"?  To scare you out of your Gold so that the desperate banks can get it!  This is all about the desperation of the banks to get Gold to cover their sorry asses.  Think about it...if every ounce of Gold has 100 claims on it, where are the banks going to get the Gold to cover their promises to deliver to those claims without driving the price to the outer reaches of the galaxy?  They are going to try and steal it!

Is it just a coincidence that today's threat of a margin hike, an $80 drop in the price of Gold during ONLY the New York CRIMEX trading session, and a post-market margin  ALL hike occur on the day BEFORE the expiration of September futures contracts on August 25, 2011?  HELL NO!  This is blatant theft in broad daylight as our CFTC regulators lie on their couches in their offices watching Looney Tunes.  It is nothing we haven't seen before prior to a monthly options expiration.  The timing of it, and the ferocity of the take down, only exposes further the desperation of the Banking Cartel's massive naked short position in Gold, AND the lack of physical supply available to the Banking Cartel to cover their asses as delivery demands on Gold that does not exist begin to rise exponentially.

The criminal Banking Cartel was calling in more favors from the CME masters today, to bail out their sorry underwater asses because they have sold far, far, far more Gold than they own.  Their hope was to drive enough contract holders to the sidelines and lessen their chances of default because of overwhelming delivery demands.  This was clearly aimed at "speculators" that recently poured into Gold following Hugo Chavez'sunxpected demand that the Bank of England, Morgan, Barclays, Standard Chartered, and Scotia return Venezuela's sovereign Gold.  The realization that the Gold central banks have leased out over the past 15 years to suppress the price of Gold, may not be "available" [at any price] to be returned to them, sent Gold traders into a feeding frenzy upon the Banking Cartel's naked Gold shorts.

Since July 1st, the price of Gold has been rising, and accelerating higher as the shorts have been mercilessly squeezed.  This bogus margin hike by the CME has less to do with claims of "market volatility" and a whole lot do with bailing out these pathetic criminal bankers whose crimes in the Gold [and Silver] futures markets are finally coming into view under a very bright light.  Have the backs of the Banking Cartel finally been broken by the simple demand for the return of Gold leased to them by a small South American country?

Venezuela may be small, but they possess the worlds 15th largest horde of Gold, 401.1 tonnes, half of which has been leased by Morgan, Barclays, Standard Chartered, and Scotia...and sold into the market to suppress the price of Gold. 

The CME thinks the Banking Cartel on the CRIMEX has a delivery problem and needs to raise margin rates to protect themselves from default by these banks.  Global Gold investors think the Banking Cartel has a much bigger delivery problem than meeting futures contract demands.  Could Venezuela's "delivery demand" be the start of a "run on the Banking Cartel"?

The 21st Century Bank Run [exceptional reading]
from FOFOA
Today, the international need for long-term reliable money still exists. Only gold can play that role to satisfaction. Speculators aside, the paper gold trade (as largely explained in Aristotle's work) has functioned as a much needed currency of gold in a fashion very similar to that just described for the dollar during the Roaring Twenties...albeit with a floating dollar attachment rather than a fixed one. The paper gold is received and held as a contract that specifies a right to gold delivery, perhaps some as a lump sum, perhaps as installments. (Contracts can be written so many ways!) The key parallel, and purpose of this post is to show you that this works only as long as confidence is retained, and that excessive issues of claims has not jeopardized the real ability to get gold without being the one left holding the bag of paper gold when the bottom drops out.

You see, when a Bullion Bank issues new paper gold, what we like to call a "naked short", it is constraining itself by making sure it has at least 10% reserves, according to Mr. Christian, in case someone decides to take delivery. Now in the case of a commercial bank, 10% reserves of physical cash may not be such a problem during a modern bank run because new cash can be printed relatively quickly. But with gold this is not the case. So even at 10% reserves, any bank run on the Bullion Banks would be a disaster.

But the real problem comes from what these Bullion Banks consider reserves. You and I obviously realize that the only reserves that will suffice in a bank run are actual physical pieces of gold. But these banks are presently relying on certain "paper gold" items as their "physical reserves".

During the CFTC hearing Mr. Christian admitted that the CPM group uses the term "physical" in a very loose way. That "physical" actually means paper claims and physical combined. So these Bullion Banks are holding paper liabilities from other Bullion Banks and mining operations and calling them "physical reserves". Very circular, don't you think?

So under this loose definition of "physical gold", perhaps Mr. Christian was not lying. Perhaps the banks do constrain their naked shorting with at least 10% paper longs from "credible sources". And if so, I would guess that those credible sources also have 10% "reserves" behind their paper. And so on, and so forth.

Well, I hope you can clearly see the problem here. When the bank run finally begins people and entities will want real physical gold, not paper longs, or liabilities from credible sources.

It all comes down to gold, the actual physical stuff. That's what the people wanted during the bank runs of the 1930's. It is what brought down the London Gold Pool. It is what forced the closing of the Nixon gold window. And it will be what people want this time too. That's the real bank run... to actual physical gold in your own possession.

“There will be a short-term impact on gold prices,” Savneet Singh, the chief executive officer of New-York based Gold Bullion International, said in a telephone interview. “The long-term fundamentals are intact.”

Let's us then consider the modus operandi of today's Gold [and Silver] market take down.  A margin increase on Wednesday morning in Shanghai gets the ball rolling down hill.  The threat of another margin increase by the CME, hot on the heels of their August 11th increase, creates a profit taking panic in the Gold market.  The CME comes out with a margin increase following an $80 drop in the price of Gold during the CRIMEX hours of operation, and declares that "volatility" in the Gold market forced them to raise margin rates.  And all this took place within 72 hours of September options expiration at the CRIMEX on Thursday, August 25, 2011. 
If the "threat" [rumour] of a CME margin increase caused an $80 panic sell-off in Gold, and that sell-off was followed by and actual CME margin increase, would it be plausible to consider this a "buy the news" opportunity with "blood in the streets"? 

Considering the August 11 CME margin increase preceded a $190 run in the price of Gold, this panic move by the CME and the banking cartel should lead to an even bigger run-up in the price of Gold shortly.

My hunch is though, that Silver is going to be the biggest beneficiary of this recent increase in Gold futures margins, much as Gold was the beneficiary following similar margin increases piled on Silver to halt its rise to $50 back in early May.  September is an actual delivery month for Silver, and the Banking Cartel is in very serious trouble with supply in their Silver vaults.  Much more so than with Gold.  It might even be safe to say that today's Gold hit had more to do with shaking the longs from the Silver tree ahead of September delivery than it did in Gold.

Keep a very close eye on the Gold/Silver ratio.  Should it fall below 40, expect an accelerated rise in Silver to quickly follow. 

The banking Cartel is fast losing control of these two Precious Metals markets.  Their desperation is there for the entire world to see.  Their "shorts" are down around their ankles.  If only the CFTC would open their eyes.


Maybe gold isn't so safe after all. After months of setting record after record, the price of gold plunged $104, or 5.6 percent, Wednesday to finish at $1,757 per ounce. That was the biggest percentage drop in nearly 3 1/2 years and a blow to investors who thought the metal could go only one way -- up.

Yeah, right.  The mainstream financial media hasn't got a clue about what drives the Gold market.  As I told you in my post yesterday, THERE IS NO BUBBLE IN GOLD!

1 comment:

  1. I would like to thank you for sharing this great information with us. I am really glad to learn about this because it helps me to increase my knowledge. Kenmole

    ReplyDelete