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CME to Cut Margins on Gold, Silver

The CME Group Inc. will broadly cut margins on precious metals including gold, silver and platinum as well as copper, a move that will be effective after the close of business on Tuesday, February 12.

CME is the biggest operator of U.S. futures exchanges, saying late Thursday it lowered initial margins on the benchmark COMEX 100-ounce gold futures contract by 10 percent to $5,940 per contract from $6,600.

The CME also cut maintenance margins by 10 percent to $5,400 from $6,000.

On December 28, the CME trimmed initial margins on gold futures by 11 percent.

The futures exchanges often adjust their margin requirements in order to protect themselves against the risk of participants defaulting in response to changing market volatility. The move by the CME could be read in this case as an indicator there is less risk in futures.

CME has also cut the margins on the COMEX 5,000 ounce silver contract by around 14 percent, and the margins on the NYMEX 50-ounce platinum futures contract by around 13 percent, fairly large margins.

Recent economic data that indicated the U.S. economy surprisingly shrank in the fourth quarter of 2012 has been supportive of precious metals at a fundamental level; despite fairly range bound activity in recent trading.

Price action in gold recently has definitely been against the grain or hard-won, making sustained prices very strong on a technical basis, but keeping the price fairly range bound. Brien Lundin, editor of Gold Newsletter, said gold’s rebound was impressive in the face of a rising dollar, but the dollar’s continued rise today eventually forced more selling in gold, and the metal slid downward, highlighting the range bound activity.

A Kitco News Gold Survey responded that out of 33 participants, 24 responded this week with 12 seeing prices up, only four seeing prices down and eight seeing prices moving sideways. Among the reasons cited for predicting a neutral or sideways market said they see no reason for gold to break out of its current trading range, though fundamentals still support gold.

Bloomberg’s gold survey of analysts and traders was split evenly with 11 bullish and 11 bearish, highlighting the difficulty of getting a clear market direction at the current time.

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