Gold fell on CME margin raise - Daily Outlook August 12

Gold changed direction and fell for the first time this week following the recent margin hike by CME; silver also followed and declined. The stock markets continue to zigzag and sharply incline yesterday. Gold and silver are traded with moderate changes. Today, the U.S. retails sales report will be published. The American trade deficit inclined in June.

Let’s examine the precious metals market for today, August 12th:

Gold declined yesterday by 1.84% to $1,751; silver also followed and declined by 1.67% to $38.67.

During August, gold increased by 7.4%, but silver fell by 3.6%.

CME raised Gold margins by 22%

Following the heavy trading and high speculation around the precious metals, mainly gold, CME (Chicago Mercantile Exchange), the world’s largest future market, decided to raise the margins needed to trade gold by 22% yesterday. Investors will need to put $7,425 to open a position on gold and maintain at least $5,500 to keep the position overnight. The rules came into effect at the end of Thursday’s trading, August 11th. This decision is likely to be one of the prime reasons for the recent sudden shift in gold that caused a cool down in the heavy gold trading in recent days. Don’t be surprised if there will be additional margin hikes in the near future, if the gold market will continue this borderline hysteria.  

 Gold and silver Outlook:

Gold changed direction and slowed down from its rally due to the recent margin hike by CME. This decision is likely to continue affecting the gold trading throughout the day, and will curb the volume of trade and the per cent changes. The high volatility in the financial markets including forex and stocks will probably continue to positively affect gold and silver. The economic slowdown in the US as seen in its recent trade balance report and the low growth rate of US GDP in Q2 2011 is likely to keep the uncertainly in the financial markets and the trade volume high.  Therefore, I still think that gold and silver will resume their rally, but at a much less volatility than before once the correction to the recent CME margin hike will be completed.

 For further reading: Gold and silver prices outlook for August 2011

 

Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.  

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