Comex Institutes Trading Collars For Precious Metals

With little fanfare or notice, the CME Group has notified the CFTC that they plan to institute trading collars for Comex precious metals trading. At present, these collars are planned to go into effect on Monday, December 22.

Trading collars or "limits" are certainly not out of the ordinary. In the commodity markets, they have long been in place to limit the daily fluctuations of the grains. In S&P futures, collars have existed for years, brought about in large part by The Crash of 1987.

However, introducing these bands for the precious metals is completely new, as far as I can tell. And you'll note that these collars are only being implemented now, with prices at their bottoms. Wouldn't it have been nice to have trading collars in place back on May 1, 2011 or April 15, 2013?

I guess, ultimately, that leads us to the main question:

WHY NOW?

According to the documents embedded below, gold trading will now halt for five minutes after an intraday move of $100 from the previous close. The same for silver after a move of $3. At the current price levels, we're talking fluctuations of 8% and 17%, respectively. Those are tremendous price changes and they certainly would seem to be out-of-reach on an intraday basis anyway. So why the sudden rush by the CME to institute the collars? What do they know that we don't know? What are they afraid of?

Perhaps it's just as simple as this...We've all been waiting for the day when The Banks would be forced to exit the commodity business. By sheer size, The Banks dominate precious metal trading as they cap prices and act as de facto "market makers" in the sector. Without their influence, paper metal would be allowed to freely trade and float based purely upon the whims of the market. Is this day approaching more quickly than we thought? Just two weeks ago, executives from Goldman, MorganStanley and JPMorgan were hauled in front of a U.S. Senate committee and grilled about their "control of physical commodities and related businesses".  http://www.zerohedge.com/news/2014-11-20/here-are-highlights-senates-fin...

Could this latest move by the CME Group be a signal that The Banks will soon be forced to exit ALL of the metals and commodities sectors that they currently control? Maybe. We can only hope.

TF

<Thanks to "infometron" for bringing this to our attention.>

CME letter to CFTC by Turd Ferguson

Comex Trading Collars for Precious Metals by Turd Ferguson

 

61 Comments

Nana's picture

Thank You Mr T

Thank you Mr T

waxybilldupp's picture

Bring it on ...

I'm thinking a month or so of hitting the collar daily on the way up would be just fine.  Just sayin' ...

wax off

silver66's picture

volatility is bad

to the upside for the system when you have money being bought!!!!

silver66

AIJ's picture

I love the smell of fried silver shorts

...in the morning......,

Nana's picture

Isn't That "Special"

Isn't that "special" for the CME to make a "SPECIAL Price Fluctuations Limits"...

galen313's picture

Things are getting interesting

They have been for the last 7 years . . . . they do seem to be building toward a cresendo for 2015.  I think this is the year, 2015, where finally the metals break loose and this bull market rips to new highs . . . . maybe even the current financial order changes.  I truly don't think it can go much longer.  I've been living these markets since 2006 unfortunately and lost my shirt, except most of my investing has been in the physical metals and I'm about even there.  But too much lost in the stocks, last year I've tried to get cute and call a bottom and make a killing on JNUG.  Very bad idea!  I'm done w/ it.  Gonna ride it out w/ the physical.

PMtoxopholite's picture

Why now?

Does this mean the CME anticipates an explosive rise in metals prices, so implemented price fluctuation limits to allow for an orderly rise? Could the fluctuation limits make it easier for the monkeys to cap price?

Hard to believe politicians would do the right thing and force the banks to exit the metals and commodities sectors. If so, you can bet they are all lined up to benefit.

-SilverIsMoney-'s picture

Gold/Oil Ratio Going Crazy...

http://www.macrotrends.net/1380/gold-to-oil-ratio-historical-chart

This was once considered very bearish for gold but ultimately wasn't the last time around and consider this...

In July 2008 the Gold Oil ratio hit a low of 6.89 barrels per OZ and then proceeded to nearly quadruple to 24.31 by February 2009 - 7 months later.

In May 2014 the Gold Oil ratio hit a low of 12.1 barrels per OZ as of today it's at 20.0 and as you can see from the graph above we are spiking. If gold continues to maintain itself as oil crashes the Gold Oil ratio could get to crazy levels not seen since since 1973 when it hit a 50 year high of 33.7 barrels per OZ.

In July of 2008 the gold price was almost 1k an OZ and proceeded to drop all the way down to $750 in September however by the end of February (when the Gold-Oil Ratio peaked) the price of gold was almost back to where it had been in July of 2008 ($1000). Ultimately as crude rebounded gold went over $1200 an OZ in 2009 and closed the year near $1100. By the end of 2010 it was almost $1400 an OZ and I don't need to go into 2011...

So what's my point here?

I predict that as the gold oil ratio starts to roll over from whatever high it's going to set (whether it's here at 20, or 24, 34, or even in to the 40s) we are going to start to see gold take off as oil does. If we are correct in that there is a physical bottom at $1130 then what choice will the manipulators of these markets have but to let crude fall while maintaining gold here around $1200? If Crude fell to $30 and gold stayed at $1200 we would get into the 40s for the oil gold ratio and then the snap back would be tremendous in gold's favor. I do not think oil will stay at these levels as this appears to just be a price war between America and Russia. We have past peak oil and in reality this shouldn't happen even if demand is tanking. The automated market is responding to the dollar strength by killing commodities.  

The question is where is that high going to be set in the ratio? The chart above shows that these types of spikes in the oil-gold ratio usually swing back pretty quickly but I also think it's safe to say we might be going much higher there for the aforementioned reasons. Either way when it does swing back into the teens or even lower it will be because oil is rebounding and gold will go higher with it.

Just my opinion anyway... hard to say how it will get manipulated down the line but these spikes in the ratio usually point to major price moves in gold whether it's up or down.

If we are about to surge, and they know it, it would explain the new rules.

However, I say bring it on, doing this will just continue to expose the farce...

PS - Go grab one of your OZs... today it buys 20 f***ing BARRELS of OIL!

jaw777's picture

Interesting

I find it interesting that they have identified a need for trading collars that are far greater than any price movements we have ever witnessed as far as I know.  There wouldn't be any reason to do that unless you expected this type of movement.  And while I'm sure some would like to see these movements to the downside, there are less than 6 $3.00 moves remaining for silver before we are giving it away.  Soooo one can reason that these are to keep things in check on the upside.  However, (And I have limited experience) it seems that halting trading most often feeds the frenzy because people recognize something unusual is going on and they want to be a part of it.  And those stuck on the short side can't get out because the market keeps going limit up.

I look forward to things going limit up for about 10 trading days in a row.

BarnacleBill's picture

Very very curious timing....

Turd -

Maybe 5 minutes is the time it takes to wheel physical through the tunnel connecting JPMorgan and the Fed?  Just kidding...

I would really like to believe that you are correct in that the banks MAY be  getting out of the markets.  There must be something more nefarious afoot methinks.

I once had an employee that could squirm around any rules or regulations.  He was a natural.  I volunteered him to review the new HR Policy thinking that he would discover any weaknesses.  Perhaps CME and NYMEX put their Division of Dirty Tricks to work specifically for a coming event that we have yet to discern?  Something BIG is coming in the next month or two.

-SilverIsMoney-'s picture

BINGO!

However, (And I have limited experience) it seems that halting trading most often feeds the frenzy because people recognize something unusual is going on and they want to be a part of it.  And those stuck on the short side can't get out because the market keeps going limit up.

Like I said... Bring it On! I would love to watch the market halt every day during a bull run - it creates total chaos and gives us more exposure than we ever get. Another unintended consequence i'm sure these ass hats aren't considering...

CPE's picture

COMMERCIAL SIGNAL FAILURE

Commercial Signal Failure, it's always the same

Havin' a nervous breakdown, a-drive me insane

CPE's picture

egad

dupe city

CPE's picture

egad II

.

CPE's picture

Let's leave silver aside for the moment

That gold had a futures market that opened on 12/31/1974, the day before Americans could own Gold legally for the first time in 40 years on 1/1/1975 is no coincidence.

Paper has soaked up some of the demand that would otherwise chase physical ever since.

But gold needs no paper market as it's use as money (nothing industrial of any size) means that all gold ever dug up is available at the right price.

That a collar must be implemented for up and down moves when this barbarous relic can never be in shortage unless the "price" is manipulated is very telling.  A free market "price" means that anyone can have 170,000 tons of gold any time they want if they will bid high enough for it.

But here we are.

The money changers appear to be scared...

lund175's picture

I AM SHOCKED

I cannot believe it was not capped at 1 percent. I will take 8% &  17% any day. 8% every day for a month x 100's and 100's of oz's.Yeah Baby!!

Edit: Just a thought. The market will hit the cap everyday thus disrupting the flow of the market.The PTB then say 1% rise per day. I hate to be negative, but these sob's are not going to make it easy.

CPE's picture

@lund175

unless the correct "price" of Au in FRN's is north of $10,000.00

Then the cap is less than 1%...

Perhaps the CME knows what it's doing........

Nana's picture

"all associated metals products"

"The Exchanges will apply special price fluctuation limits to all primary metals futures and options contracts and all associated metals products that are available for trading on the floor."

So does that mean it can transcend beyond metals?

kardnul's picture

What if?

What if Russia decided to one up the US and their oil price war, and back the Ruble with gold?  Its obvious the Ruble is in big trouble now and something needs to be done soon.

Someone earlier posted about Russia attempting to make their banking system independent of SWIFT this month.

Some people think it is feasible to do. China might back them also.

http://www.goldmoney.com/research/analysis/russia-s-monetary-solution

​Methinks it would surely rile the Comex.

btcgoldbull's picture

So

If the commercials are finally planning to let the gold and silver futures markets trade freely then we can expect a final beat down between now and 12/22 so they can cover their shorts and get long and stay long? If it seems too good to be true, it probably is

Bollocks's picture

Speaking of the Ruble

Some interesting analysis here, particularly in the first 7mins

CPE's picture

Re: So

That's not the right expectation

If you can create currency units (all banks can according to the BoE) then would you cover shorts with your money printing?

Or would you buy all the physical you can instead so that the collars stay behind your new physical position?

Hmmmmmm

btcgoldbull's picture

@ CPE

I would keep the price suppressed until the very last available 400 oz LBMA good delivery bar was spoken for

Turd Ferguson's picture

I agree with you

MODERATOR

DO NOT expect some kind of blastoff or resolution on or before Dec 22. This moves is simply setting the table for days to come.

Response to: @ CPE
Bollocks's picture

So, oil is down by approx 45% since June

so why is Bollocks here in the UK still paying 92% of the June price?
The big drop isn't being passed on to us crying.

Pence per litre (uk dates - day/month):

09/06 - 129.69

21/07 - 131.04

25/08 - 128.34

22/09 - 128.62

27/10 - 125.11

24/11 - 122.29

08/12 - 119.83

June to December = -10p/litre = approx 8% drop.

There's some serious thieving going on.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/384131/weekly_prices.csv/preview

indiana rod's picture

December 22

If the position limits that take effect 12/22 signal that the explosion in price is expected, perhaps Bo Polny and Harvey Organ were right. Their timing was just off by three weeks.

jaw777's picture

HOW MUCH FUN

Would it be to watch Steve LIEsman explain why gold and silver are going limit up day after day.  His head would explode and Rick Santelli would probably piss his pants laughing.

Gosh I really hope I get to see that!

And I agree that this isn't likely to happen for a long time.  But a guy can dream can't he?

Bollocks's picture

22/12

2+2+2+1 = 7

Sorry, had to.

I'll get my coat...

Luigi's picture

2+2+1+2=7

2+0+1+4=7.  

TinHat's picture

Infotron

Thanks for getting info to Turd !

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