Morning Gold Fix – November 10, 2010

FMX | Connect – www.fmxconnect.com - (Reported 11/10/2010)

The following is a summary of yesterday’s US gold activity and a recap of Asia & European markets overnight. It includes our proprietary options analytics and news stories from industry professionals.

 



Summary

December gold traded as high as $1424 per 100 troy ounces on Tuesday. After settling at $1410.10 a rapid sell off saw futures trading at the 1390 level.

December gold was down $13.50 to $1396.6 per 100 troy ounces as of 8:15 AM EST this morning. The December U.S. dollar index was up .321 to $77.905. January platinum was down $43.4 to $1766.2 per 50 troy ounces. December silver was down 134.6 cents to $27.560.

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Editorial Commentary: Interpreting the Silver Move Yesterday

They have unlimited cash for margin borrowed at fed discount window. You have a 20% rate Mastercard with unredeemable points (capital one lies)

They tell their creditor, the US Treasury, what assets on their books are worth (mark to myth). You get told what yours are worth by the banks or some objective 3^rd party and must pony up the cash to cover the difference

They have no need to assess VaR, their balance sheet is infinite. You have to think about your next pay check and must decide whether 2 cars are really 1 too many.

When the comex raises margins, all these things force you to puke your longs, and incentivizes them to add to shorts.

And somehow the info comes out post floor hours, during the thinnest trading time of all. Not hard to push a market on news like that. But more telling is that the silver market drops precipitously before the close.

Your superior intelligence and bankroll mgt is no match for their fed sponsored balance sheet. You will not win in the long run. Casinos change decks midgame too you know.

If you’re right, they raise margins, prevent physical delivery, tax sales, make ownership illegal. You cannot win.

Like everything else, those that are in power want only to stay in power. Free competition is a risk for incumbents in fin, pol or govt

Right now levers are being pulled, rules lobbied against and changed, markets managed to make sure they stay in power. Its not a conspiracy, just self interest

There are good people with good intentions out there trying to keep the markets level and fair, but the money determines the rules now in a significant way. Rules can be gamed.

We are a nation of laws , not ethics, and you cannot legislate morality without leaving a loophole somewhere.

Raising margins was not an exchange ploy to hurt you. But when was the last time margins were raised after a sell off? It has probably happened but I’m willing to bet the action is lopsided to the rally side.

Raising margins was not a scheme to crush you. But why is it needed, when for every long there is a short? And when the shorts have infinitely more capital than you, and there is no short squeeze of physical (as evidenced by the contango in the spreads)

Trading SLV doesn’t help, they arbitrage both sides from one account.  You unfortunately do not have a letter of exemption for position limits and  for carrying positions in 2 markets and cross margining agreement with your clearinghouse.

By  Elizabeth Thawne




In the News

Bloomberg (Reported 11/10/2010)

“Gold climbed in London on demand for an alternative investment to currencies. Silver and palladium advanced.

Gold reached a record $1,424.60 an ounce yesterday on concern debt-stricken nations in Europe will struggle to repay bondholders and spending cuts will stifle growth in the region. Precious metals are rallying as the U.S. Federal Reserve buys more debt to keep the economic recovery from flagging. CME Group Inc.’s Comex unit yesterday raised margin requirements for silver futures.”  Gold Advances on Increased Investor Demand for Alternative to Currencies.



Reuters (Reported 11/10/2010)

“In its most volatile day of trade since May, gold dropped more than $30 from this peak in the previous session, triggered by a sharp sell-off in U.S. silver futures caused by a 30 percent hike in margins as well as a stronger dollar.  Supporting gold further was investor discomfort over debt burdens in the euro zone and the risk of funding problems or even potential default in some peripheral countries of the single currency block.”  PRECIOUS-Gold steady around $1,400, euro zone in focus.



NS Futures (Reported 11/10/2010)

“After seeing December gold soar $28 an ounce above last Friday’s close in less than 2 trading sessions, it is not surprising to see some back and fill weakness this morning.  Surprisingly gold is weaker this morning despite talk overnight about China possibly overtaking India as the world’s largest gold importer.

While equity markets in Asia were mixed, stock markets in Europe have generally moved lower this morning.  US stock indices are slightly higher during the early Wednesday trade.” Daily Metals Commentary. 



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