"Notice how they never reduce margin requirements after a correction or when prices are falling?"
There is a very good reason why CME performance bonds (initial margins) have continually increased during recent years. Mathematics!
The performance bond provides protection for the CME in the event that a Clearing Member defaults. The amount is determined by a proportional (percentage) shift in the price of gold based on recent observations of price movements.
If that proportional shift is 10%, the performance bond will be $100 when gold is $1000 per ounce and $200 when gold is $2000 per ounce. As the price of gold goes up, so does the margin requirement.
You can reasonably point out that CME didn't cut the margin during the recent correction. There are two reasons:
1. CME try to keep the margin requirement constant and predictable, so they review it periodically. The last time was August. 2. The main reason for the last upward review was the increase in volatility, which feed the proportional shift assumption. Increased market volatility means increased potential losses on Clearing Member default, and hence increased margins.
The decisions on margin levels are decided by CME risk management. Their sole interest is to ensure that all client obligations are met. They have no interest in the direction of the price of gold.
