CME Holds Gold Margins Steady Despite Higher Volatility

CME Group Inc. (CME) didn't raise collateral requirements for gold futures trading, despite a measure of volatility reaching its highest level since Aug. 24, the last time CME raised margins.

Margin adjustments are based on volatility rather than price, a CME spokesman told Dow Jones Newswires.

"It is our goal to protect the market, whichever way it moves," a spokesman told Dow Jones in an email.

However, the Chicago Board Options Exchange Gold Volatility Index (GVZ) hit a high of 32.93 Thursday. The measure, like the CBOE's Volatility Index, tracks the market's expectations for swings in gold over the next 30 days.

The index set a recent high at 34.42 on Aug. 24, the same day CME last raised gold margins. At the time, the exchange operator increased by 27% the amount of money traders must put up to open a position in the benchmark 100-troy-ounce Comex gold futures contract.

Speculative investors in the benchmark contract currently must put up $9,450 to open a position and maintain $7,000 of that to keep the position overnight.

Gold traders have been concerned that CME may again raise gold margins as gold prices have seen larger price swings and wider trading ranges in recent days.

"Spikes in volatility tend to coincide or come before a major turn in prices," said Tom Pawlicki, a precious-metals analyst with MF Global.

Pawlicki expects gold futures to retreat from recent records and trade as low as $1,700 a troy ounce in coming weeks as trader attention rests with economic data and key U.S. and European policy decisions due to be announced over the coming weeks.

"There's a lot of uncertainty about what the upcoming events will yield," Pawlicki said.

Gold for December delivery, the most actively traded contract, settled $39.90, or 2.2%, at $1,857.50 a troy ounce on the Comex division of the New York Mercantile Exchange.

-By Tatyana Shumsky, Dow Jones Newswires; 212-416-3095; tatyana.shumsky@dowjones.com

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