China’s updated trading rules for gold and silver squeeze speculators, but quality purchases are rising - Metals Daily CEO Ross NormanKitco NEWS has a diverse team of journalists reporting on the economy, stock markets, commodities, cryptocurrencies, mining and metals with accuracy and objectivity.
By contrast, he believes that the speculative flows that entered the precious metals market as gold set new highs were asset-agnostic and fickle by nature. “t's a pure exercise in making money,” Norman said. “Long or short … gold or soda ash futures … who cares. Like 12-year-olds high on e-numbers, the futures market can be a riot of activity, rife with rumour and everyone keen to jump on the latest fad.
“China has tightened trading conditions as a safeguard in a gold market that it clearly deems to be too hot,” he said. “On April 8th, the Shanghai Gold Exchange advised gold margin requirements would be tightened from 10% to 12%, and the daily price limit would be adjusted from 9% to 11%. On April 12th, further adjustments were made. Starting from the close of clearing on April 15th, the margin requirement for gold contracts was increased from CNY 45,000 per lot to CNY 51,000 per lot.
“There is a sense that the speculative froth is leaving the market, and as it declines, gold will re-engage with its core physical buyers who have been left behind,” he said. “If you want to know where that floor is then the charts will give you a view – and if not, Indian bargain-hunting is normally a great bell-wether. In short, this is healthy for gold.”
“So as speculators depart stage left, it appears that 'quality' gold investment is re-entering stage right,” Norman concluded. “So grounds for encouragement.”
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