More physical gold to serve as collateral: CME

CME Group has announced that their customers are going to be able to post more physical gold as performance bond collateral. They raised their amount from $200 million to $500 million. The current interest rate for gold is negative, making it very cost efficient for the holder to place it as collateral.

By Myra P. Saefong
Oct. 3, 2011, 2:43 p.m. EDT
Market Watch

SAN FRANCISCO (MarketWatch) -- CME Group CME +1.23% said its customers will be able to post more physical gold as performance bond collateral, raising the amount to $500 million from $200 million as of the close of business on Monday. Performance bonds, or margin requirements, are money investors must put up to be able to trade futures contracts. Bullion customers had asked the CME to raise the amount, according to Harriet Hunnable, managing director of metals products at CME Group. "A number of our clearing firms hold gold in London and want to utilize more of it for collateral," she said. "The interest rate for gold is currently negative so this means that it is very cost efficient for a holder of gold to place it as collateral."

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