Margin requirements take down silver

The financial broker and asset management firm MF Global made the somewhat unusual move of raising its margin requirement by 75%, before the Chicago Mercantile Exchange did the same thing.

Here is the story on CNN:

http://www.cnbc.com/id/42828370

That was a big jump in margin requirement that obviously has some folks worried. Silver came down roughly $5 from its close on Friday this morning in Asia.

At the same time, gold moved up to the high $1570’s and then came down to $1545 as the Euro sank slightly. That erased some of the stellar gain on Friday but already gold has bounced significantly.

So the reality with silver is a little hard to ascertain. It is bouncing, but one wonders if London and NY will add to the downward movement or see this as a buying opportunity. Considering the big banks were covering shorts last week at a frantic pace, it seems likely that more buying will step in.

Anyway, the $5 drop in silver is shocking, to the say the least. That will have a lot of folks mighty concerned when they wake up.

The news about higher inflation in Europe was an interesting counterpoint to the move by MF Global. As of Friday, it suddenly looked like the ECB might raise rates again, as early as May. Here is the story:

http://www.businessinsider.com/eurozone-inflation-april-2011-4

Are these two events related? If the Euro jumped because of an anticipated rate hike, the dollar would have tanked and gold would have spiked - well, I guess it did spike. It certainly blew through resistance at $1545 and is now using that as support. But maybe the take-down in silver kept it from really exploding.

In order to keep your eye on the prize, here is a timely reminder of why gold and silver are the place to be:

http://www.gata.org/node/9854

The dollar, Euro and Yen are toast. It’s just a matter of which one is less bad at any given time. Which is why the monetary metals are rising like they are.

And the big picture is that commodities are rising. No matter what theory you use to support that fact, it’s still a fact. And here is an interesting perspective on how unique this is in the past 100 years:

http://www.energyandcapital.com/articles/trailer-park-investor/1504

Commodities had been dropping for a century. Until in 2002, they turned and have been going up since. This is of massive historical significance. No one is entirely sure why this is happening, though the most likely theory is monetary liquidity. But the dollar has been losing value since 1913, when the Federal Reserve was invented. So the actual reasons may be more mysterious and rare. The point is, this is a big trend and not one that will likely change anytime soon.

This entry was posted on 02/05/2011 at 08:22 am and is filed under Gold. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

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