September’s gold price movement has been a study in contrary trends.
While gold reached $1,900 on the 2nd and has cascaded downward $243 to Friday’s close at $1,657 on the spot market.
While European banks from Germany, France and Belgium are teetering on Greek default concerns the liquidity trap from overnight lending in dollars has been the main driver, US hedge funds have also been big sellers especially this week.
Hedge funds threw out many babies with the bath water this week due to covering margin calls on leveraged bets. Gold is a case in point, but Apple and Google also suffered sell-offs.
Given the fall in gold prices, late Friday’s 23 percent rise in margin requirements by the CME does not make sense, unless we have something afoot for Sunday into Monday.
There is a strong possibility of a major market moving event very soon. Why else would you dramatically raise margin requirements on all precious metal including silver and platinum?
Is there a Greek default or a European bank being nationalized? Perhaps, lord knows there are many candidates from Dexia, SocGen to Morgan Stanley.
I am giving fair warning that tomorrow or Monday may see soaring volatility and therefore a need to suppress gold prices. This volatility will not be an outright liquidity squeeze so there in lies the need to squash gold and silver.