NEW YORK ( TheStreet ) -- Gold prices were lower Thursday after the Chicago Mercantile Exchange raised the amount of money it costs to buy a speculative gold futures contract and after gold spiked to a record of $1,817.60 an ounce in overnight trading.
Gold for December delivery was down $18.20 to $1,766.10 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,817.60 and as low as $1,753.50 while the spot gold price was losing $32.50, according to Kitco's gold index.
The CME finally stepped up and raised margin requirements on gold, that is the amount it costs to buy an 100 ounce gold futures contract, after the metal skyrocketed more than $200 in 3.5 weeks. It now will cost $7,425 to buy a speculative contract and $5,500 to maintain it, both represent a 22.2% increase.The CME deployed the same technique with silver in May when prices skyrocketed to almost $50 an ounce, which then led to more than a 30% decline in the metal. If the same were to occur in gold, prices would dip to under $1,300 an ounce. However, gold seems to be shaking off the margin requirement as cries for a safety net as the Dow Jones Industrial Average nears bear market territory. "We noted at the start of the week that a margin hike could dent the bullish sentiment in gold," says James Moore, research analyst at FastMarkets, who thinks, along with other traders, that gold could benefit from a period of consolidation. "But, with little in the way of positive news in-sight and threat of default/downgrades continuing to overshadow markets gold will likely remain underpinned and could potentially extend to fresh highs." Scott Redler, chief strategic officer for T3Live.com, says that it's hard to buy gold at record levels, his favorite vehicle is SPDR Gold Shares (GLD), but says "I still expect significant upside due to continued demand ... It looks like
-- Written by Alix Steel in New York.
>To contact the writer of this article, click here: Alix Steel.
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