09-26-2011, 12:45 AM
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Confirmed User
Join Date: Oct 2001
Posts: 1,901
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ETFs might arguably be the problem...
http://www.ritholtz.com/blog/2011/09...etals-margins/
Quote:
To begin with, commodities are purchased with futures contracts, which offer enormous leverage to speculators. As of this Monday, the minimum cash deposit for trading gold futures will be $11,475 per 100-ounce contract ? at $1700 per ounce, that is a $170,000 position. The leverage is nearly 15 to 1. Stocks and bonds, for comparison, trade at 2 to 1 maximum leverage using firm margin. At 15-1, a less than 7% move against you wipes out your capital entirely.
Put it in other terms, if you have $100,000 to speculate with, you can purchase $200,000 worth of stock, or using the same $100k, you can buy $1,481,481.48 in gold futures.
Back in Q1 2009, when Gold was $1000 per ounce, you only needed $5,807.70 to buy 100 ozs of gold in futures (worth $100,000); That?s a little more than 17 to 1 leverage. At those levels, a less than 6% move against you wipes out your capital.
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