Copycat: Shanghai Follows CME, Raises Gold Margins

by Todd Shriber

Perhaps one reason for the nasty tumble gold took on Tuesday can be attributed to folks at the Shanghai Gold Exchange doing its best CME Group (CME) impression and raising forward gold margins by 12%.

That hike goes into effect on Friday. And the Shanghai Gold Exchange, China’s primary precious metals exchange, will also widen daily trading limits for those gold contracts to 9%, up from 7%, according to Reuters.

As was the case with CME and its silver margin increases earlier this year, the folks in Shanghai aren’t timid about multiple margin increases in short amounts of time. Before August, the Chinese exchange hadn’t raised gold margins once this year. Now, the exchange is up to two margin increases just this month and there are six trading days left in August.

For its part, CME has resisted raising gold margins since Aug. 11, but that hasn’t dampened speculation that the exchange operator is preparing to throw another curve ball at gold bulls. Last Friday, Interactive Brokers told its clients that a CME margin increase on gold was “imminent,” according to The Wall Street Journal.

How effective the margin hikes by any exchange operator are on gold remains to be seen. After all, even with Tuesday’s slide, the SPDR Gold Shares (GLD) fund is higher than where it was on Aug. 11.

Disclosure: Writer is long gold through the iShares COMEX Gold Trust (IAU).

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