Metal loses nearly $40 after exchange increases margins
By Claudia Assis and Polya Lesova, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold futures slumped nearly $50 an ounce Thursday, extending recent sharp losses, after exchange operator CME Group raised margin requirements.
Gold for December delivery GC1Z -1.38% fell $38.90, or 2.2%, to $1,721.40 an ounce on the Comex division of the New York Mercantile Exchange.
On Wednesday, Chicago-based CME Group Inc., the Comex’s parent company, increased margin requirements to trade gold 27%, effective at the end of trading Thursday. The company had increased margins, or the money needed to trade a gold contract, earlier this month.
“Speculative financial investors are clearly closing long positions on a large scale” after the increases, Commerzbank analysts wrote in a note.
Gold hit a nominal record settlement at $1,891.90 an ounce on Monday, the latest in a string of records.
A correction started with a loss of more than $30 on Tuesday — and then a $104 plunge on Wednesday.
Gold had surged in recent weeks about 25% from its July lows, reflecting “the market’s concerns about fiscal finances, the outlook for the global economy and inflation, but most importantly the belief that the U.S. dollar was headed lower,” said Kathy Lien, director of research at GFT, in a note.
Evidence that the U.S. economy was again losing steam has fueled concerns about a possible double-dip recession, leading Federal Reserve Chairman Ben Bernanke earlier this month to vow U.S. interest rates will stay near zero over the next two years, which was beneficial to gold.
But a third program to buy U.S. debt and further pressure on interest rates remains an open question. Investors will key in on a much-awaited speech by Bernanke at a yearly summit in Jackson Hole, Wyo., on Friday.
“We maintain our view that gold will peak with the beginning of monetary tightening in the U.S.,” BNP Paribas wrote in a note. “In our current forecast, this occurs in 2013, but a move in rates could take place earlier should economic conditions improve more quickly than currently expected.”
Most metals traded higher on Thursday. Silver for September delivery SI1U +1.64% added 4 cents, or 1.1%, to $39.61 an ounce. September copper HG1U +2.20% rose 9 cents, or 2.2%, to $4.09 a pound.
