CME To Cut Gold Margin Requirements

By Murray Coleman

The cost of buying gold futures is set to drop next week.

The CME Group (CME) said Thursday it was lowering initial and maintenance gold margins by 10%, effective after markets close on Monday. The CME’s initial margin requirements will decrease to $6,075 per futures contract. Maintenance margins were lowered to $4,500.

The CME’s initial margin requirements relate to the minimum amount of cash that must be deposited when borrowing from brokers to trade silver.

Earlier this year, a series of CME hikes were blamed by some for helping to put the breaks on a run-up in silver.

Now the question becomes whether a drop in collateral required by traders to buy futures contracts is a strong enough catalyst to spur gold prices higher.

Since reaching $152.37 a share in late April, the SPDR Gold Trust (GLD) fell almost 4% through early May. Since then, it has managed to earn most of those losses back. The ETF’s rise, however, has been at a much more tepid pace than seen earlier in the year.