Thursday, 11 August 2011

Gold slides off record after margin increase

By Claudia Assis, MarketWatch

SAN FRANCISCO (MarketWatch) — Gold futures traded lower Thursday, taking a breather after topping $1,800 an ounce the previous session and after the exchange operator increased the money needed to trade in futures contracts.

Gold for December delivery declined $22, or 1.2%, to trade at $1,760 an ounce on the Comex division of the New York Mercantile Exchange.

Gold on Wednesday settled at a record $1,784.30 an ounce and traded as high as $1,801 an ounce, an intraday record, on concerns about the health of European banks and France’s sovereign-debt ratings in addition to worries about the U.S. economy in the wake of the Standard & Poor’s U.S. credit downgrade last week.
After settlement Wednesday, the CME Group Inc., which owns the main U.S. exchanges for metals, grains, and energy, raised margin requirements for gold trading, prompting investors unwilling or unable to put up more money to sell.

In May, a string of CME margin increases in silver futures rocked the metals markets and brought losses upon all commodities futures, as investors who couldn’t meet the new silver requirements had to liquidate their positions, dragging prices down.

Silver suffered its worst five trading days in more than 30 years during the first week of May, with silver-futures prices down almost 30%.

Initial margin requirements to trade gold rose to $7,425 per 100-ounce contract from $6,075, and maintenance margins increased to $5,500 from $4,500, CME said.

The changes are effective Thursday. The CME also increased margins for a host of lesser-known products such as foreign-exchange futures and a small-cap equity index futures.

Claudia Assis is a San Francisco-based reporter for MarketWatch.

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