Margin requirements have just been cut for gold & silver futures trading on the COMEX. Here’s what it means…
The CME group has dropped the margin requirements by just over 10% for gold and just under 10% for silver.
Trading on margin means that a trader is borrowing the money to make his or her trade.
Since we are talking about huge dollar values in the contracts, this is a big deal.
One gold contract on the COMEX is 100 ounces of gold. One silver contract on the COMEX is 5000 ounces of silver.
If gold is trading for $1250 per ounce, the price of the contract would be not $125,000 (not counting fees, commissions, etc), but it would be whatever the margin requirement is if the trader does pay in full to open the position.
In other words, many futures “traders”, mainly the small speculators who don’t have deep pockets and direct orders from the ESF and the Fed to suppress the prices of gold & silver, must trade on margin.
So announced yesterday and effective today, the CME Group has reduced the margin requirements to trade paper gold & paper silver.
What does that mean?
It means a trader does not need as much “down payment” to open up his or her position. You see, margin can be thought of like buying a new car with a loan. The “margin requirement” is the “down payment” on that car.
If a trader does not need as much margin to open a trade as was required before, a few things can happen:
It will be cheaper to open the position, so the trader might open more positions then he or she otherwise would have, or if a trader has been on waiting on a specific range for the price of the underlying asset to hit, well, if it’s close enough to the price, the trader may go ahead and open the position.
In other words the CME Group would and does publicly state that they lower the margin requirements due to low volatility, but in reality, it is a way for hedge funds and small speculators to take on risk at a lower cost for that risk.
Here’s why it could matter:
Everybody can see that the COT Report is now bullish. A hedge fund might say, “hey, I’m gonna go long on a some silver futures contracts” (Which means they are going to buy the contract to hold thinking the contract is going to rise in price).
The trader purchases some silver contracts on margin. Heck, it’s so low risk right now as evidenced by the CME Group dropping their margin requirements that the trader decides to scoop up some gold contracts too.
Now, the bullion banks take hedge funds, small speculators and the likes to the cleaners all of the time through their various precious metals price suppression schemes.
Not only does the cartel rake in the illegitimate profits this way, time and time again, but margin is just one other tool at their disposal to manipulate the price down.
The hedge funds and speculators get bullish and since the CME Group has lowered the margin requirement, they can now buy more than they otherwise would have.
The price rises because as we know, more buyers than sellers moves price up. Prices going up or down can be volatile.
If the price silver, say, rallies to $18.50 in just a month, as an example, the CME could then decide, with one day warning like just now, that they want to raise the margin requirements.
Depending on how they go about it, a trader would have to pony up more fiat currency to maintain his or her positions. If the trader does not have the cash available to pony up the higher margin requirement, the trader is forced to sell.
If the traders are forced to sell because of increasing margin requirements, well, anytime there are more sellers than buyers, price goes down.
To sum it up:
Gold and silver are set up very bullishly on the charts right now.
The cartel knows this.
The cartel is essentially setting themselves up for future forced selling because they have made it cheaper to trade gold and silver futures contracts.
Initially this means that traders will enter the market and buy up contracts on the bullish set up. If that happens, we could see nice upside price action in the precious metals.
At the time of the cartel’s choosing, so long as they are still in coercive and forceful control, meaning that gold and silver have not broken free from their manipulative chains, the cartel will jack up the margin requirements at a later date and force traders to sell out of their positions.
– Half Dollar