CME Group, operator of the major U.S. futures exchanges, including the Comex, has been changing margin requirements to knock down gold and silver prices…
Dear Friend of GATA and Gold:
Market analyst John Kim shows today how CME Group, operator of the major U.S. futures exchanges, including the Comex, has been changing margin requirements to knock down gold and silver prices and thereby discourage contract holders from taking delivery of metal. Kim adds that CME Group is even buying metal for its own account after changing margin requirements to push prices down.
Kim urges coin and bullion dealers to stop using futures prices in the pricing of their own products, so that the physical market destroys the paper market and its manipulations at last.
Kim’s commentary is headlined “Precious Metals Dealers: If the CME Artificially Creates Dips in Paper Gold and Silver Futures Prices by Raising Margins, Stand Your Ground” and it’s posted at his internet site here (with an excerpt below):
Ever since I started drawing attention to the act of the Chicago Mercantile Exchange (CME) quietly but significantly raising margins on all COMEX gold and silver futures contracts at the end of February, while pointing out back then that “this event was nowhere to be reported in the mass media”, this banker tool to suppress gold and silver prices has been receiving more attention. Since just a few months ago, as of 13 April 2020, initial maintenance margins for the 100-ounce COMEX gold futures contract and the 5000-ounce COMEX silver futures contract have respectively soared by an astounding 86% ($4,950 to $9,185) and 73% ($5,720 to $9,900). Furthermore, the banker effort to keep silver prices suppressed, though many people falsely believe that bankers care not about silver prices but only gold prices, is readily apparent in the leverage of these two flagship futures contracts. At a current paper gold and silver prices of $1,685 and $15.25 respectively, the initial margin gives the gold futures contract a leverage aspect of 18.3:1, while the 5,000-ounce silver futures contract is levered at just 7.7:1. Upon first analysis, one may think that the higher leverage of the gold futures contract automatically identifies the gold price as the one more important for bankers to manipulate, as the leverage aspect is much greater, and therefore bankers can control a greater dollar value of paper gold with a lesser initial up-front purchase than in silver. However, the much smaller leverage ratio established with the silver futures contract is established to control the amount of ounces that may be impacted in the physical world, not the paper world. Because the most liquid COMEX silver futures contract deals with 5,000 ounces, a size fifty times greater than the most liquid COMEX gold futures contract, if leverage ratios were the equivalent of the gold futures contract at 18.3:1, and long positions in COMEX silver futures contracts stood their ground at highly leveraged ratios, hundreds of millions of physical silver ounces could easily be called into delivery which would provide a massive problem. Consequently, this undesirable outcome, at such low paper physical prices, explains the much lower leverage of silver futures contracts versus gold futures contracts.
But let me return to an exposition of just how absurdly rapidly CME officials have raised initial/maintenance margins on COMEX gold and silver futures contracts. CME officials, in an attempt to shake the longs of gold/silver futures positions out of the market and prevent the longs from asking for physical delivery, raised initial margins in such an extreme fashion that the current initial and maintenance margin levels ($4,592/ $4,175) for the e-mini COMEX gold futures contract that represent half the size of its much more heavily traded sister contract, are now nearly equivalent with the margin levels of its much larger sister contracts from just a few months ago ($4,950/ $4,500)! And in regard to the e-mini COMEX silver futures contract, its current initial margin of $4,950 is also rapidly catching up to the initial margins of its much larger sister contract from just a few months ago. CME officials took such desperate measures in order to discourage physical delivery of gold and silver in the midst of already very tight global supplies. However, as I explained here, many longs in the gold and silver futures market stood their ground in the face of exploding margins and asked for physical delivery instead of being chased out by the CME rising margins, thus creating massive anomalies between paper and physical gold and silver prices.
End of excerpt
Toast to a free gold market
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