COMEX is old school.
They either are genuine and are looking to manage volatility in the precious metals market (as is publicly stated) or are pimping for the central banks and enabling reckless fiat policy.
Their volatility management strategy involves raising the margins for speculative trades in big percentage jumps, thereby causing the rapid unwinding of global trading strategies and causing the very volatility they say they are trying to manage.
Conveniently, radical COMEX changes in margin reserve requirement take the pressure off COMEX to settle in physical delivery or high cash premiums, since the prices fall in a disorderly fashion.
The COMEX just shot another rabbit these past two days, and raised the margins for trading on silver by 16%, after several successive increases in May (during the last sell off in paper price). The fact that the unwinding and sell off came in advance of the announcement would indicate news of the margin increase leaked, but that's another story.
I believe the official rationale of the COMEX is horse crap, by the way.
If they are genuine, there is a much simpler and better way to manage volatility in the COMEX trading markets that gets no discussion.
All the COMEX has to do is require fiat security of equivalent percentage interest in the underlying contract be held, not a fixed fiat amount. Right now if a speculator wants to take a position on a 100 oz gold contract, they are required to put up a fixed amount of dollars, regardless in the price fluctuation of the price of gold per oz.
This is why I believe the COMEX is just blowing smoke in everyone's face when they state their goals, because there is no way that so many trade-smart people could do something so asinine and old school in a hypertrade environment.
Right now as the fiat price of gold rises, then the percentage held as security (a fixed fiat value relative to ounces bullion) of the total value shrinks. The price of gold rises and rises until the COMEX decides to raise the margin requirement and yank the rug out from the trade assumptions, causing a catastrophic and disorderly unwinding of global positions and increasing volatility.
This generally causes prices to move in the negative direction, to the delight of central bankers who need the intrinsic value to flow back into fiat paper for their inflation games.
In the logical scenario, security interest in the contracts would adjust automatically with the fluctuations in price. If the price of silver in the markets rose by 10%, then 10% more security fiat would have to be posted by the speculator with the COMEX. If it fell by 10%, then the speculator would be credited or refunded a like amount.
Given we are in an electronic world where money moves as fast as electrons allow, an electronic ledger would not be onerous to set up. No one writes checks anymore.
This would provide a better system for volatility management, since it is a natural braking system for extreme price moves in the upwards position. Price spikes would be slowed by ever-increasing calls for collateral posting, and likewise mitigated in the downward direction, since more capital would be relinquished to the market by the COMEX for redeployment into undervalued classes.
The fact that this is not the way the system runs today tells me a great deal, that the COMEX is either:
Whichever it may be doesn't matter for me right now. Buying physical whatever with depreciating fiat is a winning move. Someday I may move more seriously into the trading games, but for right now what I see from the ringside is a rigged game. Not an impossible one... but one w/ a shark rule or two I need to learn first.
They either are genuine and are looking to manage volatility in the precious metals market (as is publicly stated) or are pimping for the central banks and enabling reckless fiat policy.
Their volatility management strategy involves raising the margins for speculative trades in big percentage jumps, thereby causing the rapid unwinding of global trading strategies and causing the very volatility they say they are trying to manage.
Conveniently, radical COMEX changes in margin reserve requirement take the pressure off COMEX to settle in physical delivery or high cash premiums, since the prices fall in a disorderly fashion.
The COMEX just shot another rabbit these past two days, and raised the margins for trading on silver by 16%, after several successive increases in May (during the last sell off in paper price). The fact that the unwinding and sell off came in advance of the announcement would indicate news of the margin increase leaked, but that's another story.
I believe the official rationale of the COMEX is horse crap, by the way.
If they are genuine, there is a much simpler and better way to manage volatility in the COMEX trading markets that gets no discussion.
All the COMEX has to do is require fiat security of equivalent percentage interest in the underlying contract be held, not a fixed fiat amount. Right now if a speculator wants to take a position on a 100 oz gold contract, they are required to put up a fixed amount of dollars, regardless in the price fluctuation of the price of gold per oz.
This is why I believe the COMEX is just blowing smoke in everyone's face when they state their goals, because there is no way that so many trade-smart people could do something so asinine and old school in a hypertrade environment.
Right now as the fiat price of gold rises, then the percentage held as security (a fixed fiat value relative to ounces bullion) of the total value shrinks. The price of gold rises and rises until the COMEX decides to raise the margin requirement and yank the rug out from the trade assumptions, causing a catastrophic and disorderly unwinding of global positions and increasing volatility.
This generally causes prices to move in the negative direction, to the delight of central bankers who need the intrinsic value to flow back into fiat paper for their inflation games.
In the logical scenario, security interest in the contracts would adjust automatically with the fluctuations in price. If the price of silver in the markets rose by 10%, then 10% more security fiat would have to be posted by the speculator with the COMEX. If it fell by 10%, then the speculator would be credited or refunded a like amount.
Given we are in an electronic world where money moves as fast as electrons allow, an electronic ledger would not be onerous to set up. No one writes checks anymore.
This would provide a better system for volatility management, since it is a natural braking system for extreme price moves in the upwards position. Price spikes would be slowed by ever-increasing calls for collateral posting, and likewise mitigated in the downward direction, since more capital would be relinquished to the market by the COMEX for redeployment into undervalued classes.
The fact that this is not the way the system runs today tells me a great deal, that the COMEX is either:
- Too stupid and clumsy to adjust and find a better way, or
- Is an extension of the corrupt central bank games to continue fiat expansion at the expense of the everyman and maintain the status quo.
Whichever it may be doesn't matter for me right now. Buying physical whatever with depreciating fiat is a winning move. Someday I may move more seriously into the trading games, but for right now what I see from the ringside is a rigged game. Not an impossible one... but one w/ a shark rule or two I need to learn first.
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