Comex Institutes Trading Collars For Precious Metals

61
Thu, Dec 11, 2014 - 3:44pm

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". https://www.zerohedge.com/news/2014-11-20/here-are-highlights-senates-fi...

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

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  61 Comments

Nana
Dec 11, 2014 - 3:58pm

Thank You Mr T

Thank you Mr T

waxybilldupp
Dec 11, 2014 - 4:00pm

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
Dec 11, 2014 - 4:00pm

volatility is bad

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

silver66

AIJ
Dec 11, 2014 - 4:09pm
Nana
Dec 11, 2014 - 4:10pm

Isn't That "Special"

Isn't that "special" for the CME to make a "SPECIAL Price Fluctuations Limits"... https://www.youtube.com/watch?v=RmwqnqL3Hbg

galen313
Dec 11, 2014 - 4:12pm

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
Dec 11, 2014 - 4:19pm

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-
Dec 11, 2014 - 4:19pm

Gold/Oil Ratio Going Crazy...

https://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
Dec 11, 2014 - 4:21pm

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
Dec 11, 2014 - 4:26pm

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.

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Key Economic Events Week of 1/13

1/14 8:30 ET CPI
1/14 9:00 ET Goon Williams
1/15 8:30 ET PPI and Empire Fed
1/16 8:30 ET Retail Sales and Philly Fed
1/17 8:30 ET Housing Starts
1/17 9:15 Et Cap Ute and Ind Prod

Key Economic Events Week of 1/6

1/7 8:30 ET US trade deficit
1/7 10:00 ET ISM Services PMI
1/7 10:00 ET Factory Orders
1/8 8:15 ET ADP employment
1/9 8:00 ET Goon Chlamydia speech
1/9 1:20 ET Goon Evans 2:00 ET Goon Bullard
1/10 8:30 ET BLSBS
1/10 10:00 ET Wholesale Inventories

Key Economic Events Week of 12/16

12/16 8:30 ET Empire State Manu Idx
12/16 9:45 ET Markit flash PMIs Dec
12/17 8:30 ET Housing Starts and Bldg Perms
12/17 9:15 ET Cap Ute and Ind Prod
12/19 8:30 ET Philly Fed
12/20 8:30 ET Final guess Q3 GDP
12/20 10:00 ET Pers Inc and Spending
12/20 10:00 ET Core Inflation

Key Economic Events Week of 12/9

12/10 8:30 ET Productivity and Unit Labor Costs
12/11 8:30 ET CPI
12/11 2:00 pm ET FOMC fedlines
12/11 2:30 pm ET CGP presser
12/12 8:30 ET PPI
12/13 8:30 ET Retail Sales
12/13 10:00 ET Business Inventories
12/13 11:00 ET Goon Williams speech

Key Economic Events Week of 12/2

12/2 9:45 ET Markit Manu PMI
12/2 10:00 ET ISM Manu PMI
12/2 10:00 ET Construction Spending
12/4 9:45 ET Markit Services PMI
12/4 10:00 ET ISM Services PMI
12/5 8:30 ET Trade Deficit
12/5 10:00 ET Factory Orders
12/6 8:30 ET BLSBS
12/6 10:00 ET Wholesale Inventories

Key Economic Events Week of 11/25

11/25 8:30 ET Chicago Fed Nat'l Idx
11/25 7:00 pm ET CGP speech
11/26 8:30 ET Advance Trade
11/26 9:00 ET Case-Shiller home prices
11/26 10:00 ET New home sales
11/26 10:00 ET Consumer Confidence
11/27 8:30 ET Q3 GDP 2nd guess
11/27 8:30 ET Durable Goods
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Key Economic Events Week of 11/18

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11/20 2:00 ET October FOMC minutes
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Key Economic Events Week of 11/11

11/12 Three Fed Goon speeches
11/13 8:30 ET CPI
11/13 11:00 ET CGP on Capitol Hill
11/14 8:30 ET PPI
11/14 Four Fed Goon speeches
11/14 10:00 ET CGP on Capitol Hill
11/15 8:30 ET Retail Sales
11/15 8:30 ET Empire State Manu Index
11/15 9:15 ET Cap Ute and Ind Prod
11/15 10:00 ET Business Inventories

Key Economic Events Week of 11/4

11/4 10:00 ET Factory Orders
11/5 9:45 ET Markit Services PMI
11/5 10:00 ET ISM Services PMI
11/6 8:30 ET Productivity & Labor Costs
11/6 Speeches by Goons Williams, Harker and Evans
11/8 10:00 ET Consumer Sentiment
11/8 10:00 ET Wholesale Inventories

Key Economic Events Week of 10/28

10/30 8:30 ET Q3 GDP first guess
10/30 2:00 ET FOMC fedlines
10/30 2:30 ET CGP presser
10/31 8:30 ET Personal Income & Spending
10/31 8:30 ET Core Inflation
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