NEW YORK (Commodity Online): Can gold--the hottest commodity in the world--be accepted as a collateral for trades on global exchanges? This week's big news with the yellow metal is that the clearing house of global exchange CME Group – CME Clearing – has announced it will now accept gold as collateral for trades on the exchange.

Gold is the first commodity that can be used for margins for CME trades, ranging from crude oil, gold, grains, equity indexes and Treasury bonds, said a press statement from CME Clearing.

Jeremy Hughes, spokesperson for CME Clearing said: "During conversations with the London bullion market, it became clear that a lot of participants were holding physical gold, and this was proving costly to them. They were interested to find out if they would look at accepting gold as collateral as an alternative to debt or equities."

From October 19 firms will be able to post physical gold to CME Clearing to cover non-segregated performance bond requirements.

Initially, gold will be deposited at JP Morgan Chase Bank in London, but the exchange hopes to add additional depositories in future.

According to global bullion analyst Jim Sinclair, the move from CME Cleaning means that gold is a valuable, fungible asset and good collateral.

"The most probable conclusion is most commodity traders lose. This means most commodity traders lose their collateral, however the counter party always has been paid in cash. I will assume that the counter party is the public and they will be paid in cash," he said in a note.

The clearing house will have to lend against the gold collateral, therefore to whom the clearing house sells the gold, gets the gold. Yes, gold goes to whom the clearing house sells it.

Alternatively, does the clearing house just take the gold and pay off the public or keep the gold if the counter party is a member of the clearing house?

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