Bullion for immediate delivery dropped as much as 0.8 percent to $1,779.20 and traded at $1,789.07 at 11:19 a.m. in Singapore. Earlier, the metal rallied as much as 1.2 percent to $1,814.95 on concern that global economic growth is stalling as governments in the U.S. and Europe remain constrained by debt.
CME, the world’s largest futures market, raised margins on gold contracts 22 percent with effect from the close of business today, according to a statement on its website. The initial- margin requirement, or the minimum amount of cash that speculators must keep on deposit, will rise to $7,425 per contract from $6,075, CME said. The margin for hedging will also increase 22 percent, rising to $5,500 from $4,500, it said.
“We did see a little bit of selloff just after the announcement but at the end of the day there’s overwhelming upward pressure on gold because of the uncertainties in other markets,” said Darren Heathcote, head of trading at Investec Bank (Australia) Ltd.
The December-delivery contract rose as much as 1.9 percent to a record $1,817.60 on the Comex in New York before trading at $1,791.70. Gold in euros, pounds, Australian and Canadian dollars also surged to all-time highs.
“Bullish sentiments could be tempered in the short term as margin requirements to trade gold have been raised,” Phillip Futures analysts including Ong Yi Ling wrote in a note. “As the costs of trading increases, some investors could be prompted to pare bullish bets.”
Gold also declined on signs equities may rebound, easing concern the global rout will continue and damping demand for haven assets including bullion, Treasuries and the dollar. Standard & Poor’s 500 futures jumped as much as 1.7 percent today, following the index’s 4.4 percent slump yesterday. Treasury 10-year yields climbed for the first day in four, while the dollar weakened against a six-currency basket.
Gold futures have surged 8.2 since Standard & Poor’s cut the U.S. credit rating by one level from the top AAA grade on Aug. 5. That S&P announcement, combined with Europe’s sovereign-debt crisis, spurred a rout in global equities and stoked concern that the U.S. may lapse into another recession.
Gold holdings in exchange-traded products climbed to a record 2,216.756 metric tons on Aug. 8, data compiled by Bloomberg show. Assets have expanded 5.4 percent this year and were at 2,209.526 tons yesterday.
“It’s just a complete breakdown of investor confidence,” said Gavin Wendt, director at Mine Life Pty. “It’s not just even the U.S. situation but it’s also the European situation that’s really worrying markets at the present time. It just seems to be the domino effect.”
CME joins the Shanghai Gold Exchange in hiking margins. China’s largest physical gold market will boost the trade-margin requirement to 11 percent from 10 percent for gold contracts from settlement today, the bourse said on Aug. 8.
Immediate-delivery gold of 99.95 percent purity on the Shanghai Gold Exchange, the benchmark cash contract, surged to a record 368 yuan ($57.32) a gram today, while bullion of 99.99 percent purity touched 373 yuan a gram, its highest ever. Gold on the Shanghai Futures Exchange also reached an all-time high.
Spot platinum climbed for a third day, gaining as much as 1.1 percent to $1,788.50 an ounce, trading below gold on concern a global slowdown will trim demand for the metal used in catalysts. Cash palladium advanced as much as 1.2 percent to $736.75 an ounce, while silver fell as much as 0.9 percent to $38.9375 an ounce.
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