September 26, 2011

CME’s New Margin Requirements for Precious Metals

CME’s new margin requirements for precious metals, effective today. The new margin requirements are meant to make Gold trading a little less speculative.


30-day Gold Price via Kitco Gold Chart

With the new margin requirements, gold can only be leveraged at 15x now rather than the previous 17x. A prudent move on part of CME but 15x is still enormous leverage. A 7% decline in gold price can wipe out an account that has bought gold with full leverage.

The recent declines, as shown in the chart, are in this range and can be very dangerous to gold traders that are fully leveraged.