CME Raises Gold, Silver and Copper Margin Requirements

On the heels of a large down week for silver, falling 26%, and gold and copper, each falling about 10% on the week, and gold down over $100 in the session, the CME Group raises margin requirements on some gold, silver and copper futures contracts. Gold was uppped by 21%, consistent with the prior raises on 8/10/11 and 8/24/11. Silver is 16% and copper 18%.

Last weekend good ole Keystone told you that the trading week would be epic for gold; it sure did not disappoint. The negative divergence was locked in and firm on both the daily and weekly charts which caused the gold spank down. Moving forward it will be interesting to watch the behavior of the ETF's such as GLD and SLV. Silver is at a disadvantage now since the gold silver ratio favors gold over silver moving forward. Silver enjoyed an over two-year run outperforming gold which drew to a close this year as the gold silver ratio moved under the 50% level and reversed. This shows that gold will outperform silver moving forward, during up periods, gold will move up a higher percentage than silver, when prices fall, gold will fall less than silver and that was obvious last week. From late 2008 into this year, silver had enjoyed the lead, not anymore.

Copper has its own problems, evidence of hoarding now appears causing the collapse in price as folks run to market to cash in their inventory before price falls further, which in itself, causes price to collapse. China ratcheting down growth projections, as well as the real estate bubble popping there, will only cause copper to deteriorate further. This is all typical behavior for commodities. Parabolic, euphoric, spectacular spikes in price, followed by equally wild demoralizing collapses.