Are Major Financial Players Running Their Own Cash for Gold Promo?

The Dow (NYSE:DIA) chalked up another losing day, making it the 6th straight day of closing in the red.  The S&P 500 (NYSE:SPY) and Nasdaq (NASDAQ:QQQ) didn’t have any better luck as both also closed lower.  The U.S. Dollar (NYSE:UUP) bounced today, which also caused gold (NYSE:GLD) and silver (NYSE:SLV) to close lower.  Although gold closed down, it has been relatively stable.  As a consequence, major financial players are starting to take notice of gold’s stability and liquidity.

Back in February, JP Morgan (NYSE:JPM) became the first bank (NYSE:XLF) to accept gold as collateral.  Now, hedge funds looking to borrow money to invest elsewhere can supply gold as their collateral. Last year, ICE Clear Europe became the first clearing house in Europe to allow gold as a form of collateral.  Now, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) is getting in on the action.  By way of unanimous agreement, ECON agreed to allow central counter-parties to also accept gold as a form of collateral under the European market Infrastructure Regulation (EMIR).  This could lead to more gold demand as it get’s closer to being accepted as a high quality liquid asset under the Capital Requirements IV Directive in Europe.

This is another bullish development for gold demand as more and more nations recognize gold as a form of currency, and not just a safe-haven.  The Chicago Mercantile Exchange (NASDAQ:CME) started this trend in 2009, when it became the first exchange to allow gold bullion to be used for margin requirements.  London clearing house, LCH Clearnet, also has plans later this year to enact a gold collateral agreement.

In the precious metal market today, ETFs such as the EFTS Physical Silver Shares (NYSE:SIVR), iShares Silver Trust (NYSE:SLV), and ProShares Ultra Silver (NYSE:AGQ) all closed lower.  Miners (NYSE:SIL) such as Great Panther Silver (GPL), First Majestic Silver (NYSE:AG), Endeavour Silver (AMEX:EXK), Goldcorp (NYSE:GG), and Barrick Gold (NYSE:ABX) also failed to produce any gains on Wednesday.

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Disclosure: Long AGQ.