Exchange operator raises collateral requirements for trading gold
By Carla Mozee, MarketWatch
LOS ANGELES (MarketWatch) — Gold prices turned modestly higher electronic trade Tuesday, with the move following a savage sell-off — gold’s worse since at least the 1980s — that prompted an increase in the amount of money investors need to trade gold futures contracts.
Just ahead of the open of European markets, gold for June delivery GCM3 +0.96% fought losses and rose $12.50, or 0.9%, to $1,373.30 an ounce.
Gold futures on Monday plunged $140.30, or 9.3%, to $1,361.10 an ounce on the Comex division of the New York Mercantile Exchange. The slide marked the precious metal’s biggest one-day percentage drop since February 1983. Gold’s one-day dollar drop was the biggest since January 1980 and the second-largest in its history.
The CME Group Inc. CME -2.71% , the parent company of the main metals and energy exchanges in the U.S., said Monday it was raising the collateral requirements for trading in benchmark gold, silver and other precious-metals futures contracts.
Collateral, or margin, to trade benchmark Comex 100-troy-ounce gold futures will be increased by 19%, and the margin to trade silver will rise 18%. Margin increases tend to be implemented during times of market turbulence.
The increases are effective at the close of business Tuesday.
Sentiment in gold has suffered after recent cuts to price forecasts for the metal, as well as outflows from gold exchange-traded products. Goldman Sachs last week lowered its average gold-price forecast for 2013 to $1,545 an ounce, a level the metal took out on Friday.
Some analysts have also said gold prices suffered in the wake of a proposal that euro-zone nation Cyrus sell more than $520 million in excess gold reserves to contribute to its financial bailout.
Prices for silver and other metals also suffered sharp losses Monday on heightened worries about slowing global growth following weaker-than-expected economic data from China, a major commodities consumer.
Silver for May delivery SIK3 -0.35% extended its fall Tuesday, down 60 cents, or 2.6%, to $22.76 an ounce. Silver on Monday fell 11% to $23.36 an ounce.
But prices for copper, platinum and palladium found some relief on Tuesday.
May copper futures HGK3 -0.38% rose 1 cent, or 0.3%, to $3.28 a pound. Copper prices fell 2.3% in the previous Nymex session.
July platinum futures PLN3 +1.02% rose $3.20, or 0.2%, to $1,428 a ounce, winning back a small slice of their 4.8% fall Monday. Palladium for June delivery PAM3 +1.46% , which lost 5.9% at $667 an ounce in the previous session, picked up $5.20, or 0.8%, to trade at $672.20.
The CME also raised the margin to trade palladium by 14%, and for platinum by 19%.
Carla Mozee is a reporter for MarketWatch, based in Los Angeles. Follow her on Twitter @MWMozee.
