Even with Higher Margin Requirements, Gold Still Glitters

The crazy flux in the equity markets has caused many traders to run for the
golden hills. Wednesday's 520-point drop in the Dow helped push gold prices to
a record $1,817.60 an ounce in overnight trade, and apparently, that was enough
for the Chicago Mercantile Exchange to throw a golden blanket on the cost of
yellow metal contracts. On Thursday, the CME upped the ante for buying gold
futures contracts, and that move prompted Thursday's selloff in the precious
metal, which fell to $1,759 an ounce. The CME raised margin requirements on the
amount it costs to buy a 100-ounce gold futures contract, so now it will cost
$7,425 to buy a contract and $5,500 to maintain that contract. That's a 22.2%
increase in the cost of going for the gold. The move by the CME comes after an
incredible rise in the price of gold price – an increase of more than $200 in
just over three weeks. Apparently, the more volatile the commodity, the more
it's going to cost you. Of course, a move to increase margin on a volatile
metal contract is nothing new for the CME. In fact, the exchange took the same
kind of step in May when the price of silver went parabolic. What has some gold
bugs worried here is that right after the CME raised the cost of silver
contracts, the metal's value plunged some 30%. Still, I think the increase in
margin requirements shouldn't dissuade those with a penchant for gold from
buying into the yellow metal. Gold is in the midst of a surge, not only because
the equity markets now are in correction mode, but also because the precious
metal represents the ultimate safe haven in times of economic turmoil. One thing
for certain right now is that fiscal turmoil in Europe and in the U.S. is the
order of the day, and until that turmoil subsides there's still a golden
opportunity for traders in the yellow metal—even if it costs 22.2% more. As of
this writing, Jim Woods had no positions in any of the investments mentioned
here.