11 Aug 2011

Gold Futures Margins Increased 22% by CME as Investors Drive Record Rally



Spot gold dropped as much as 0.8% to US$1,779.20 and traded at US$1,788.25 at 12:58 p.m. in Singapore. Earlier, the yellow metal rallied as much as 1.2% to US$1,814.95.

Gold prices fell from a record high above US$1,800 an ounce after the CME Group Inc. (CME) lifted the margins on futures contracts to rein in possible speculation. The precious metal has been consistently surging in the past several days, hitting new all-time highs, as global investors flock to its relative safety amid rising concerns on the economic prospects of the US and the eurozone.

Spot gold dropped as much as 0.8% to US$1,779.20 and traded at US$1,788.25 at 12:58 p.m. in Singapore. Earlier, the yellow metal rallied as much as 1.2% to US$1,814.95.

CME, the world’s largest futures market, raised margins on gold contracts by 22% with effect from the close of business on Thursday.

The initial-margin requirement, or the minimum amount of cash that traders must deposit with the CME, will rise to US$7,425 per contract from US$6,075.

The margin for hedging will also increase 22%, rising to US$5,500 from US$4,500, it said.
Cash silver fell as much as 1.1% to US$38.8325 an ounce. Spot platinum climbed for a third day, gaining as much as 1.1% to US$1,789.75 an ounce. Cash palladium rose as much as 1.4% to US$738.25 an ounce.

Gold for December delivery rose as much as 1.9% to a record US$1,817.60 on the Comex in New York. It was recently trading at US$1,788.10.

Gold in euros, pounds, Australian and Canadian dollars also surged to all-time highs.

Gold holdings in exchange-traded products rose to a record 2,216.756 metric tons on Aug. 8. Assets are up 5.4% this year and were at 2,209.526 tons yesterday.

The Shanghai Gold Exchange also increased margins on gold trading. China’s largest physical gold market will boost the trade-margin requirement to 11% from 10% for gold contracts.

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