The change is having an impact on the price of gold today, and one investment analyst told BullionVault:
For those who cannot put out margin calls on time, they will be squeezed out even when they don’t want to get out.
That will do nothing to support gold prices. In fact, quite the reverse. If gold was being used as collateral for secured loans (cash-for-gold), we are now likely to see an increase in cash margin calls. If the dollars are scarce, then these gold positions will have to unwind in order to avoid defaulting. The result is more yellow metal becomes available. And the more gold there is available, the lower the price.
There are ways to hedge that golden collateral, but only if the futures price is expected to be higher than the current price (contango). If the market is backwardated and current prices are higher than the futures price, then now is the time to unload that yellow metal.
As the old song goes, “Which side are you on?”
Take This Retirement Quiz To Get Matched With An Advisor Now (Sponsored)
Are you ready for retirement? Planning for retirement can be overwhelming, that’s why it could be a good idea to speak to a fiduciary financial advisor about your goals today.
Start by taking this retirement quiz right here from SmartAsset that will match you with up to 3 financial advisors that serve your area and beyond in 5 minutes. Smart Asset is now matching over 50,000 people a month.
Click here now to get started.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.