LCH Clearnet has joined the CME (and soon the BIS) by declaring unallocated gold as eligible collateral for margin cover purposes, effective 8/28/12.
Essentially, the free market has outvoted Ben Bernanke that gold is merely ‘tradition’ and is a barbaric relic, as all major exchanges now accept cold hard gold bullion as well as cash as margin collateral.
As we have mentioned previously, this means gold will trade exactly opposite to it’s crash in 2008 during the next major financial crash/panic, as it is now a tier 1 asset across all exchanges.
Gold as Collateral Acceptable for Margin Cover Purposes
From 28 August 2012 unallocated Gold (Loco London) will be accepted by LCH.Clearnet Limited (LCH.Clearnet) as collateral for margin cover purposes.
This addition to acceptable margin collateral will be subject to the following criteria;
• Available for members clearing OTC precious metals forwards (LCH EnClear Precious Metals division) or precious metals contracts on the Hong Kong Mercantile Exchange. Acceptable to cover margin requirements for all markets cleared on both House and ‘Segregated’ omnibus Client accounts.
• Daily valuation, with an initial haircut of 14% applied.
• Concentration limits will be applied as follows;
o lodgement not to represent more than 40% of total margin requirement of participating members across all products, including for contingent variation margin (but not realised variation margin), applied at a legal entity sub account level.
o a maximum lodgement limit per member group of USD 200m (currently approximately 130,000 troy ounces).
• LCH.Clearnet will make an accommodation charge of 20 basis points (bps) on utilised collateral amounts based upon member defined usage ordering rules. Costs incurred from the custodian will be passed on to clearing members on a pro rata basis and based on the value of the collateral lodged.
• Members who are eligible and wish to lodge gold for margin cover purposes will be required to submit an executed Gold as collateral ‘charge’ document for the ‘House’ and/or ‘Client’ accounts together with supporting paperwork. Please contact the Membership Team to request the relevant legal documentation needed for approval to lodge gold as collateral.
• Procedures and account details can be found in at the link below prior to the live date and thereafter in Section 4 – Collateral, of the LCH.Clearnet Ltd Rulebook. http://www.lchclearnet.com/rules_and_regulations/ltd/proposed_rules.asp
• For further details of acceptable margin collateral please see the following link, which will be updated to reflect the addition of Gold Bullion from 28 August 2012. www.lchclearnet.com/risk_management/ltd/acceptable_collateral.asp
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Gold is money. Silver is money, (sorry Ben). The obvious benefit to owning silver vs gold, aside from the possible upside, is the fact that in times such as it seems we could be facing soon, it can actually be USED as money while gold would be far too cumbersome. I can see the person trying to buy a gallon of milk saying to the clerk….”can you break a troy ounce of gold?”. I don’t know about you but I got into silver primarily as insurance against bank holidays and/or societal collapse. Here’s the point, if there is a collapse, silver will come in very handy vs gold. If there is no collapse, silver will come in handy as an investment. Either scenario silver wins, that is as long as it’s value keeps increasing, and as long as the global economy continues to falter and more fiat currencies floods the marketplace, it seems to this sucker at least, that it will continue to rise in price against the sad sad dollar.
Hi ho Silver……away!
Throughout recorded history gold and silver have always been the the peoples’ money of choice. Government issued fiat paper is the money of politicians. When the governments screw it up, the people always go back to their gold and silver. And the fiat paper becomes the barbarous relic.
P.S.
For the cleck to make that change of the ounce of gold, silver must be used! (see above post).
SilverSucker, you might want to do some research on silver ratios (‘prices’) against commodity goods like foodstuffs and other consumables during the late 1800s once those ‘price’ ranges were well evolved over the prior century. You’ll find that silver is far too expensive for daily ‘shopping’. Most incidentals were ‘priced’ in ‘cents’ at that juncture; that is to say, in copper.
These developments must be thought out with utmost caution! Between the 1920s and 30s, the banks nearly swept ALL our grandparents’ gold onto their vaults with their paper trick-’money’! I would pose that it was actually Ruse-a-veldt’s sense of governmental self-preservation that compelled him to ‘confiscate’ what gold remained in the public realm before the bankers succeeded in getting it ALL. The bankers may have pulled off their paper shell-game once, but we ought to be supremely vigilant against being fooled TWICE, in exactly the same way.
The gov’t is not going to confiscate physical silver or gold. They will just tax the gains. That’s why I say you really might want to hold your PM’s in the form of U.S. constitutional money and not bars or rounds. I think the gains will be treated entirely differently between the two forms. Several states(the number is growing) are proposing legislation to make silver and gold eagles spendable public money. If that passes, and I think it will, as things collapse the gains on your eagles will be tax free because they’re money. Bullion will be treated differently and gains will be taxed heavily.
They will be using unallocated gold stored in vaults along with allocated. How much allocated will slip over into the unallocated side?