And so it begins.
Those who followed precious metals in 2011 will recall this game plan all too well:
Smash gold and silver prices using unprecedented amounts of naked paper shorts, then announce massive margin hikes (due to increased volatility) to force capitulation among any longs holding out. 

After large take-downs in gold and silver in thin holiday trading last week, the Shanghai Gold Exchange announced today it will raise gold margins to 13% effective Dec 28th.

2013 Silver Eagles As Low as $2.59 Over Spot at SDBullion!


China’s leading gold exchange, The Shanghai Gold Exchange said it will again raise margins and daily price moving limits for its gold contracts.

China’s largest exchange for precious metals attributed this decision on the increased volatility in the precious metal sector.

The exchange will raise margins on gold contracts, including the gold spot deferred contract, to 13 percent from 12 percent from the settlement of Dec. 28.

Limit for daily price movement will rise to 10 percent from 9 percent from Dec. 31, the exchange said in a statement on its website.

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  1. Ok, I’ll bite.  How will this really affect gold and silver prices.  How substantial are the Chinese exchanges and are they able to affect prices?  If so, will this be to paper trade or, better yet, force prices down to make the purchase of gold and silver more economical?  Just curious since I have not clue as to the extent of these effects.

    • Good Q’s, AGX. I would have thought that raising margin requirements would raise prices, as it could, but: Many times it drops prices because weak hands sell off their un-backed stock, which is seen by the markets as a sell off, VOILA! Waterfall. Strong hands would just throw in more fiat and call it a day, but apparently many buying on margin cannot afford even a 1% hike. Remember when the
      CRIMEX doubled margins in the last year or so? Price Drop! 1% might be more of a “tweak” but we shall see.   

    • …the rest of these moves? NO IDEA! Prolly the same intended result, lower prices. 
      I’d love to see in the next few years a move to a 100% physical backed market, or
      at least a set of common sense, ENFORCED RULES. Dreaming I guess…

      We will have the black market where Silver and Gold are properly valued  LOL 

    • Seems there was a nice arbitrage trade referred to hear last week by Andrew McQuire, as the Shanghai Exchange allows minimum delivery of 30 kg bars, so outlining the difference between paper and physical. Just a recap for anyone who missed it.
      Hopefully this is just bureaucrats being bureaucrats, and maybe just maybe its an attempt at the orderly-minded Chinese trying to regulate their market, without trying to suppress the price.

  2. “Analysts said this move will probably cause investors to sell, since they will have to deposit more funds in order to meet the new margin requirements.”

    anyone who continues to play in the rigged paper casino of the sociopath bankers deserves to be raped and pillaged……. 

  3. Its the same shit, different day (SSDD).  The Chinese are the frontrunners in fakery, deception, and building a facade around all that is grimey and gruesome in their environs.  Lets not forget these are the ChiComs, Gertrude? Duh!!!!!!!

  4. Morgan Stanley and Citigroup have both urged investors to get out of John Paulson’s hedge funds. John Paulson is (was) the biggest single holder of GLD. And GLD is (was) his biggest holding. He’s right to be bullish, but his timing sucks. I feel sorry for him. If his investors are liquidating, it forces him to dump large quantities of GLD on the market. This is enough to seriously batter the price of gold.

    Silver follows gold. Hiking margins in Shanghai isn’t going to help.

    Isn’t it nearly time for PSLV to step in and make another offering?   

  5. I’m sure that the Chinese have their own version of the CFTC. They do as much about criminal behavior in the metals markets as the CFTC does which of course is nothing at all! The price is being smash down and no questions asked about margin hikes at the same time. Knowing full well what the result will mean for their PM holdings! It will have the same effect as what happened when the Crimex did it!

  6. Nobody is talking about the real issue here.  If the Shanghai exchange continued to price physical metal higher than the COMEX, the arbitrage would drain the COMEX of metal very quickly.  So it would appear the brakes are being put on to stop that from happening.

  7. What do you expect to happen when the Comex, as they did with the Hunts, changes the rules such that one can only sell silver but not buy any silver?
    And, what do you think the chances of them not doing this all over again? 

    • ”Get the govt out of education. Let educational institutions compete to deliver a great product at a good price”. Exactly. Let this prejudiced, tenured, bigotted washout professors see what real life is like, and get accountable to the market, like everyone else. Blast down the ivory tower with cannon balls of fiscal and moral rectitude. Universities only exist because the taxpayer is bamboozled into thinking they are teaching, when they are only indoctrinating naive kids with faded flower power b.s.

  8. Currency combat and precious metal wars presage the hot ones. 
    we have plenty of both. 
    I don’t see the ministers, presidents and central bankers blinking one bit in these clashes. 
    their egos nothwithstanding, they know they are in a fight for and of their lives. 
      the people be damned, of course. 
    We are always left on the bloody floor when these people are having their way with each other.
       they never feel the pain of the fights either.
    We feel nothing but the pain of the wars that surround us

    • “We feel nothing but the pain of the wars that surround us”

      So it is time for a very hearty “Hi, Ho, Silver and f*** them all!”  Keep on stackin’ brothers and sisters.  This is how us little folks tell them to FO&D.  We do not need them and having a sizable stack of PMs is the very best way to demonstrate that.

    • The biggest difference is that America and Europe in the late 1970s weren’t flat broke and plummeting even deeper in debt (REAL debt, where commodities are increasingly rocketing away from their currency values), so the prospect of high interest rates to kill a red hot borrowing frenzy was a viable course. That choice is as dead as a sun bleached skeleton.

    • Aye. I see ZIRP for a long, long time. Interest rates will eventually go up in the long run. They’ll have to, but it won’t be by choice.

      Still, the charts are scarily similar, and I think the less sophisticated investor will see that, and not the big picture.

  9. Tawnyard says:

    Aye. I see ZIRP for a long, long time. Interest rates will eventually go up in the long run. They’ll have to, but it won’t be by choice.
    I disagree.  They will print what ever it takes to keep Treasuries at a near 0% interest rate.  Even once the flawed CPI starts rampping hard, they will keep printing.   By the time they stop (if they do stop), the US Dollar will be collapsing.

    • I know what you’re saying. By the time interest rates start to rise, the dollar will be next to worthless. And the national debt will have been offloaded. There’s only two ways out. Bankruptcy or hyperinflation. I see ZIRP to 2015 and beyond.

    • ” I see ZIRP to 2015 and beyond.”

      Well, I do not.  I don’t believe that this crazy scheme can be sustained for more than another year or two tops.  By the end of 2015, IMO, the financial train wreck will be complete and there will be NO cars remaining on the tracks.  Those of us who stack PMs, however, will be the ones who have gotten off of that train at the last station or two.  🙂

    • I think we see the same scenario playing out, just at different rates. I never would have believed that gold would still be at $1650 or lower going into 2013. We’re pretty much assured QE to infinity, and gold still hasn’t reclaimed its 2011 high. 

      When people say ‘slow motion train wreck’ they mean it. I’ve revised my estimate for hyperinflation and collapse of the dollar. I originally thought 2014, but now I’m looking at the 2015 to 2016 timeframe. Some experts are even saying this madness could be dragged out to the end of the decade. The suffering will be greater, but I’m trying to be glad of the extra time to prepare.  

  10. A margin increase from 12% to 13% is rather insignificant, and would likely shake out only a handful of levered longs.
    There was an attempted raid on gold in the Asian markets starting 6pm New York time, but it failed (see volumes and price reaction on Netdania). So much for this margin increase affecting actual overlevereged longs or the sentiment of underlevereged/not levereged longs.

    • Oh, here we go with this ‘tally sticks’ junk. Money is NOT … SOLELY … AN … INSTRUMENT … OF … TRANSFER. Money’s principal function is CONVEYANCE … OF … TITLE.  That’s what makes metallic units the ideal money. A piece of metal embodies full title in its lawful possession and when exchanged for another like item of self-entitlement, not only do the items cross hands, but their titles as well.

      All this goofiness of ‘tally sticks’, banknotes and token coinage fails at money’s primary purpose … to keep provenance of titles perfectly linear and incontestable. THAT’S … HOW … GOVERNMENTS … IMPOSE … THEMSELVES … INTO … PRIVATE … DEALINGS.

      So, go away with your government-centric ‘free lunch’ ideas of ‘tally sticks’. This group isn’t a pack of gullible idealistic teens, longing to extend their state of dependency by transfering it from their parents to any government.

  11. The western governments and central banks want lower Pm prices and the the Chinese want lower metal prices. For some crazy reason a country like India which is one of the B.R.I.C.S. countries, is trying to make the prices so high that people can’t aford it. Why I wonder? Anyway Both the east and the west want lower PM prices but for very different reasons it seems. Maybe it only seems that way. The Chinese are not only buying physical. They are buying huge amounts of paper metals too. When it is time for the banks to payoff and the bullion banks can’t deliver, do the Chinese expect to take control of whatever physical is still left in the west in places like the NY Fed, West Point & Fort Knox? That doesn’t belong to the banks or the Fed! Its public. But I doubt that will stop criminal government from handing it over to them if they decide it’s somehow in their intrest to do it.

  12. it only goes to show that business continues as usual … if you hold paper you play the paper game … if you indebt yourself to hold something it can and often does backfire … the advantages of owning outright is you have no risk…

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