Is The COMEX Manipulating Gold Margins To Mask Silver Supply Deficits?

The manipulation of margin requirements is a classic example of short-term cause and effect. Short-term trading 'noise' can never be confused with manipulation, but the old trading axiom suggests no coincidences in this business. The downward adjustment to margin requirements with gold near its all-time highs is strange indeed.

The COMEX has just dropped the minimum margin requirement for gold contracts to $6,075 from its former $6,751 minimum. This move does not make economic sense as the price of gold is now within 2% of its all-time high COMEX close.

The lower margin requirement also does not make sense when compared to the COMEX margin requirements for silver contracts. With the lower margin requirements it is now possible to control more than $25 worth of gold for every $1 of margin put down on a gold contract. In contrast, the silver contract minimum margin requirements are much higher. At today’s closing silver price, investors could only control up to $8.30 of silver for every $1 of margin put down on a silver contract

The market often speaks in clues rather than complete and obvious sentences. Subtle hints must be viewed as circumstantial evidence. Meaning, it's not actionable material. When they’re view within content of leverage money flows and other hard evidence, clues can be arranged into complete sentences.

Think about it for a minute. By the end of this month, the next round of COMEX silver options will expire and the first day of notice for delivery of July 2011 silver contracts will occur. Both of these events could trigger strong demand that could seriously deplete COMEX registered silver inventories.

On June 16, 2010, the COMEX had 119.5 million ounces of total silver in its bonded warehouses. Since then, there has been a steady outflow of silver from these warehouses, especially of the registered silver that is available to fulfill contract deliveries. Early this week, total COMEX silver inventories had fallen below 99 million ounces, a decline of more than 17% in the past year. Even more important, the quantity of inventories that were registered had fallen to record low levels below 30 million ounces! The remaining COMEX inventories are “eligible” which means that that they are owned by investors who are simply storing the silver in COMEX warehouses. Eligible inventories cannot be used to fulfill COMEX contracts unless the individual owners choose to make them available for that purpose.

Source: coinupdate.com