Bloomberg News

CME Raises Margins for Gold as Prices Fall to Lowest Since 2010

June 20, 2013

CME Group Inc. increased the margin requirements on gold trading after prices fell to the lowest since September 2010.

The minimum cash deposit for gold futures will rise 25 percent to $8,800 per 100-ounce contract at the close of trading tomorrow, Chicago-based CME said in a statement. For platinum, the initial margin was raised to $3,465 from $3,080.

The CME’s Comex unit is making it more expensive for speculators to trade after gold fell as much as 7.2 percent today and prices entered a bear market in April. Bullion has declined 23 percent this year as some investors lose faith in it as a store of value. Federal Reserve Chairman Ben S. Bernanke said yesterday that the central bank, which buys $85 billion of Treasury and mortgage debt each month, may begin reducing purchases this year and end the program in 2014 should the economy continue to improve.

“The CME is trying to keep a lid on volatility,” Michael Smith, the president of T&K Futures & Options Inc. in Port St. Lucie, Florida, said in a telephone interview. “They’re always going to do that with the kind of selloff we’re seeing. Once the volatility starts to go sideways, you’ll see margins come back down.”

Gold futures for August delivery plunged 6.4 percent to settle at $1,286.20 on the Comex in New York. In electronic trading after the market settled, prices touched $1,275.40, the lowest since Sept. 21, 2010.

The metal’s 60-day implied volatility, a gauge for future price swings, touched 31.866, the highest since November 2011.

Investors sold 520.7 metric tons from gold-backed exchange-traded products this year. The price slump hurt billionaire hedge fund manager John Paulson and producer Newcrest Mining Ltd. Bullion rose for 12 straight years through 2012 as global central banks expanded record stimulus programs, boosting the appeal of precious metals as alternative assets.

Platinum futures for July delivery declined 4.2 percent to $1,363.80 an ounce, the lowest close since Nov. 12, 2009.

To contact the reporter on this story: Joe Richter in New York at jrichter1@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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