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Gold Plummets 5% - Why? Margins!



August 24, 2011 – Comments (0) | RELATED TICKERS: GLD , IAU

It was amusing, but not in the good way, to read the usual suspects engaging in market dynamics punditry trying to explain the sharp drop in gold today. Then, I read the WSJ article (dang, should have gone there first). All of a sudden, the light bulb went on, and even then, the real cause was buried at the end of said article.

See, the Shanghai Gold Exchange increased the margin requirements from 11% to 12%. Do you remember the sharp drop in SLV not too long ago? The cause was Comex increasing the margin requirements for silver.

Well, it is deja vu all over again.

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