The Chicago Mercantile Exchange has raised the margin requirement for gold futures contracts by 22%. The initial-margin requirement, or the minimum amount of cash that speculators must keep on deposit, will rise to $7,425 per contract from $6,075. The margin for hedging will also increase 22 percent, rising to $5,500 from $4,500. The maintenance-margin requirement for gold was increased to $5,500 per contract from $4,500.
Spot gold hit an all-time high of $1,813.79 on Wednesday before selling off on news of the margin hike. Commodities often sell-off short-term following a margin increase, only to later resume their climb if fundamentals warrant. Given that we are on the edge of a near global inflation, the fundamentals suggest increasing demand for gold. In other words, expect a resumption of the climb after the pullback.
Here's the hike I was waiting for/expecting to come down. Thanks for keeping me updated Mr. Wenzel, I planned on buying some more on the eventual downturn. Glad it happened sooner rather than later.
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