The CME’s war on precious metals continues.

After moving to price margin based on a % of notional on the 13th of January, and hikes to margin requirements on the 30th and 2nd of February, the CME has hit the market again, raising margin on gold 1pp, to 9%, and silver 3pp, to 18%, effective 6th of February. Compared to its pre-Christmas level, the notional value of margin on the 100oz gold contract has slightly more than doubled (USD 43.7k/lot) while silver has nearly tripled (USD 65.7k).

The initial effect of this announcement was to see metals prices slide, but they’ve regained composure. Volatility remains elevated but I anticipate that gamma will start to bleed out and as it does so, volatility will subside. The effect of these margin hikes will be to lower speculative activity across precious metals markets, but it will do nothing to correct their underlying supply-demand mis-match, nor will it in any way alter the macroeconomic/political environment that’s driven demand. So, while speculative interest is liquidated, metals struggle, but I expect prices to resume their uptrend.