CME Lowers Margin on Gold and Oil

Just in time for the summer doldrums, margin madness comes back to the commodity markets.  Having pushed both markets to more politically manageable levels, the CME Group (CME) cut the initial and maintenance margin levels for both crude oil (USO) and Gold (GLD) by 13% and 10%. That they did this on the same day that they announced a 5 to 1 split of their stock is the highest form of arrogance.

There nothing quite like rubbing the muppets’ collective noses in it, now is there boys?

Gold spiked intra-day towards $1580 before being sold off back into the mid $1550′s.  Quoting a closing price on gold is silly since it now trades 24 hours a day. Oil is flirting with the $90 level and this move is timed just perfectly to encourage the speculative longs to come back into the market just in time to be fleeced by a late June QE announcement by the Federal Reserve.  Open interest and volume on the COMEX has dropped by a factor of two since this time last year when the price was similar to where it was then.  Half the volume, means fewer traders and lower profits for the CME, who is owned, remember by all of the major players in the commodity markets, most notably JPMorgan (JPM).

Don’t kid yourselves, the markets have done nothing but trade counter-intuitively for nearly a year.  I fully expect any gold rally that happens on a QE announcement to be quickly followed by multiple margin hikes once the open interest reaches sufficiently large levels to scalp the muppets one more time.

Take this as the sign that it is, an open invitation to be willingly parted from your money.  If you want gold, go buy a coin or two.

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Tom Luongo

About Tom Luongo

Tom Luongo is a professional chemist and self-taught economist who has been following and trading stocks for nearly 12 years. He has no formal ties to the financial industry and considers that an asset in his analysis of the interplay between monetary policy and capital markets.

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