It's official: CME mafia raises gold margin

11:57 am (Hawaii) Not that it matters to a lot of traders and investors, but the CME mafia made it official. Bloomberg reported 24 minutes ago that the margin requirement in gold was raised 27%.

Bloomberg: Gold margins raised 27% on CME's Comex after biggest price drop since 2008

I'm in cash, have my little sack of physical gold and silver, so my stress is almost nonexistent. In fact, if the CME mafia has its way and spot price in gold plunges off a cliff to below 1700, I'm ready to re-enter. Right now DZZ is holding at 4.90-4.94. I noticed it climb to 4.94 a little while ago, but that's the extent of it. If the market were really surprised by the CME mafia move, DZZ would be well over 5.00 by now.

Out of paper gold

6:49 am (Hawaii) I'm out of DGP. Took my small position and nice profit out of the equation. Much as I see gold going higher in the long run, for now, it's impossible to deal with short-term fluctuation and the trend is down. DGP got over 66 intraday yesterday and was still above 64 in premarket today (while I slept).

It tanked to 62+ this morning and I sold at 63.25. It was on the way back to 64 before CNBC started talking again about the margin hike requirement. I think it won't be long before gold and DGP go higher again, but there will probably be more margin hikes, eventually deflating the speculation and enthusiasm and cornering price into a range. As long as mainstream media keeps beating gold and silver to a pulp, I'll wait for momentum to return.

It's a game the CME mafia love to play. JP Morgan raises its price target above $1,800 on Friday. By Monday, they raise the target again, to $2,500. On Wednesday, they announce the margin hike. Coincidence? Hell no. They're making money on both sides of the trade while burying silver.

The recent action neutralized my latest buy of DGP at 63.46, but I'm content with the trade. I'm not interested in riding DGP down below 60 or 55. My entry point was around 49, and I don't expect to see that again. I'm more apt to quick trade in DGP now, play DZZ (2x bear) on the next margin hike. Trading something like DGP is almost ideal. There will be swings now, maybe from 60 to 65, 62 to 67, maybe on a daily basis. DGP and FAZ, that's a big enough list for short-term trading in my book.

I still like silver, but as long as the CME mafia has a lid on it, I'm not trading it. Silver tanked today with gold, but gold and silver miners are healthy, just trading up with the market (DJ +356/3.3%, Nas +87/+3.7%, S&P +40/+3.6%).

By the time I woke up, it was almost noon Eastern, so I missed the big move higher. Best move I made yesterday was to get rid of FAZ before after hours trading closed. Sold at 70.57 for a small loss. FAZ now at 62.98. It's not that I like banksters now. It's just basic numbers. The market is going to come back after huge losses in three of the last four sessions, including yesterday's monster drop. The machines are all about momentum.

Round mound of rebound

11:15 pm (Hawaii) It was not more than three days ago when Spot Silver was tumbling downhill, dipping below 35 and looking weak as heck. Spot Gold, not so bad. But now, with gold at a new high and pushing 1600 in overnight/Asia trading, and silver back at 39, the psychology of round numbers is upon us.

I learned from trading gurus like StockGuy22 that people have barriers in their minds that often will trigger selling no matter how good a stock is. In marketing terms, this is known as anchoring, when a specific number dominates the decision-making of consumers. 40 is a major point of focus for silver. It won't linger there long, I believe. The price will pass 40 and not take long to spark a run back to 45 ... or it will teeter at 40 for a short while before selling pressure is applied. Would people who bought at 40 or higher opt to get out once silver returns to that point?

I tend to think they'll hold and see where spot silver goes. But if it does rip through the low 40s, how long would it be before the CME mafia inflicts the market with another round of margin increases? They could certainly to this to silver again, but gold? I don't see them corralling gold, not when so many gold owners are actually banksters themselves.

Of course anything is possible, which is why I'm not overly excited about this latest PM run. 31 to 39 is a fair range considering the remarkable gain in silver over the past two years. There's no need for greed. There is value to be made if your hand is patient.

Well, that's just forked

3:56 pm (Hawaii) There was a window of about 10 minutes when I contemplated whether to unload today's positions in AGQ and UCO. AGQ was up to about 214 in the final hour or so, I forget. But it was doing a lot better after I waited it out. I bought it at 209.81 and it treaded below that level for at least two hours while I grumbled at my bad choice of entry point. But it was up for me late in the day, so good.

Then there was UCO, which I bought 20 minutes before the closing bell at 51.40. It went right to 51.50, then 51.60 and higher. I felt all right, even though both UCO and AGQ had run hugely already. So, which I whined a little about Scottsdale Silver stackers and bars getting price increases, sometime along the way, CME raised crude oil margin requirements by 25%. Same shit that they did to Spot Silver.

How did I not see this coming? For whatever reason — ignorance, stupidity, take your pick — I never thought of UCO as something that would be manipulated like silver. But there it was. I didn't even know until Kudlow brought it up more than two hours after the bell. All I knew was that the price action in UCO was lame and declining after hours. The margin hike explained everything.

So I held my position, for better or worse. It could be ugly tomorrow for crude and my fairly sizable position (by my meager standards). Who knows? Maybe CME will give it the ol' extra effort and hand silver another margin hike. Then I'd be wishing I stayed in fiat 100%. For now, I'll hold UCO and possibly unload on any decent surge close to my entry price, but I'm not expecting much.

All I had to do was empty my positions before the bell and I would've had a decent profit for just a few hours of "work". It would've easily offset my small losses from the early-morning trades in AGQ. I would've even been better off ignoring the market to 1) sleep, or 2) shop for more physical metal.

Moving on ... now that I  think about it, I should've opened a small position in a crude bear ETF/ETN. Here are four of them: DTO (double short), SZO, SCO (ultra short) and DNO. Based on today's afterhours action, looks like SCO is the most liquid, moving up roughly 1 buck before closing at 43.51. Okay, I feel a little better. If crude sucks badly in the morning, SCO it is.

Update 4:26 pm (Hawaii) It just makes too much sense. I should've been riding crude oil up and down since February. I always wanted to play gas prices and milk the situation instead of griping about the rising cost for a gallon of it. But now that it's coming down, I'm ready to use SCO to short crude. Timing will be a challenge, but it's a logical hedge to my UCO position. Wish I'd thought of it much sooner.

CNBC: CME hikes crude oil margins by 25% (May 9 2011)

Update 10:35 pm (Hawaii) There are theories out there, all right. One is that as Spot Silver's crash last week took crude oil down, so it shall be now that crude oil is under pressure due to margin requirement baloney by CME. That could be true when the U.S. market opens. For now, crude oil has cut its earlier loss in half and is down less than 1% (80¢) to 101.81/barrel.

Spot Silver? Seems to be doing just fine at 38.16, climbing up as Hong Kong enters its final two hours of the session. I'm very interested to see what happens when gold futures start trading in Hong Kong on May 18. Could be a chance for Asia to really seize control of price. Or maybe it'll be much ado about nothing. I'm guessing it'll be the former.

Spot Gold? 1514.00 and climbing. I'm not feeling so bad about my positions right now, but it's a long way until the opening bell.

CME: 5th margin hike in 9 days

11:25 am (Hawaii) There we go. CNBC reporting that CME Group has enacted a fourth fifth margin hike on silver in the past week and a half. This is not shocking anymore. SLV has dropped in the past two minutes, but it's not cratering the way it did last week or earlier this week. The market has come to expect slippage, and in fact has been dropping in advance of margin hikes.

Whatever the case, it's a lot of b.s. for any trader to take, coming just from one stock or ETF. I'm glad I got out before the silver pullback last week. Seems like ages ago.

Fast Money talking to an official from SLV. He won't answer the questions in detail. Looks like a shady dude. No surprise there...

2:05 pm (Hawaii) Afterhours trading is done for the day. I've spent as much time looking at silver coin and bullion prices as I have anything else. It's interesting, educational to a point. But mostly, it's just strangely enticing to look at bullion bars of silver. Bars have something that coins don't, just that sheer chunkage, though nothing seems to have a premium like certain coins, i.e. American Silver Eagles.

I'm learning as I go, and maybe one day I'll have a vast store of precious metals. Maybe I'll say, forget it, it's too late, the time to buy silver was 2009 when Spot was in the teens (or lower) ... not here at 39+ or last week's 49+ per ounce.

ZSL tempted me a bit. Thought about a little position before trading hours ended, but decided to just wait this out. I'm still watching from the ridge with my binoculars, completely in camouflage gear and overnight provisions. Those silver bears are not getting near me.

Some reading for the evening.

King World News: Sprott has more physical silver now than ever (May 3 2011)
(video) Peter Schiff: 'I think the vast majority of the silver correction is over' (May 3 2011)

Update 2:34 pm (Hawaii) Don't mind me and my little precious metals fixation. Sometime in the future, PMs won't be so hot and sexy. I won't be thinking about them so much. It'll be old fashioned again. But for now, all things metal fascinate me. 

Hong Kong to open trading now. Spot Silver is at 38.95. Spot Gold is at 1516.50. If a bounce is coming soon, now might be the time. I'm watching from the woods up on the hill. All cash. 

Update 3:36 pm (Hawaii) Just saw something that knocked me out. On one of the silver/gold shop sites, I saw the 10-ounce silver bars by Johnson Matthey/Engelhard available. I remember that being a silver producer in demand, so the price was a little higher than other 10-oz bars. I had to think for awhile, then concluded that it would be better to wait until tomorrow or Friday to see where Spot Silver price goes. (Currently 39.00.) The price for one bar was $431 or something close that via credit card. 

I surfed around to other shops and stuff for a few minutes, went back to that shop's site, and the same Johnson Matthey/Engelhard bars were "OUT OF STOCK." Talk about demand. Then again, if people are selling silver to shops like mad (from what I understand) this week, more of these should pop up, maybe at a lower price. But I was real close to buying a 10-ouncer for the first time. 

Update 4:27 pm (Hawaii) Spot Silver treading water at 38.96. Spot Gold at 1517.30. Absolutely no lift from Sydney and Hong Kong. Seems everybody's spooked by the five margin requirement hikes. Blood in the water and nobody wants to be a hero. Can't blame them. 

King World News: Ben Davies interview (May 5, 2011) (I think this is a replay of the interview done on Monday, but it remains pertinent.)

Update 5:25 pm (Hawaii) Some very poignant and discerning words from a fellow named Jim Sinclair.

Silver is not money. It is simply too bulky to be freely and universally fungible. After this short play, which had to follow the spike intermediary top, silver will rise as fast as it did again.

Jim Sinclair: Silver being silver (May 4 2011)

King World News/Jim Rickards: QE is dead, QE is perpetual (Mar 11 2011)

Mike Maloney: $39 level has a huge probability of finding support and bounce (May 4 2011)