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Friday, January 21, 2011

Comex hikes margin requirements for some commodities

On January 5th, I posted about the intent of the Futures Trading Commission to clamp down on large positions in futures. That event will take months to come into effect. I stated that any regression of commodities due to this action would be temporary, and that speculation is not the root of commodity price jumps over the long haul. Speculation price spikes can only happen in a market where the spread between production and demand is tight.

Recently commodity prices has been falling, and Thursday we know why. Comex today raised margins requirements for gold and silver by 6%, along with some other commodities. The recent price declines I suspect was big money with the inside scoop lightening positions to avoid the required sell off to meet margin requirements.

Of course, I am wrong, since that would be illegal for insider trading information on government regulation changes......

In any event it will be interesting to see what this, and future steps will do to commodity prices. But make no mistake we are in a commodity bubble run, being fueled by all the loose money finding a "home" in commodities.

I am basically waiting for Gary of the smart money tracker to give a green light for gold and silver for me to reload.

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