Gold and Silver Ownership and Prices Will Not be Affected by Dodd-Frank Legislation on July 15

Gold is trading at $1,507.70/oz, €1,044.69/oz and £941.54/oz. 

Gold is higher again today as the Greek debt crisis and continuing strong demand from Asia continues to support prices. 

The euro is surprisingly firm with the U.S. dollar, Japanese yen and Swiss franc under pressure. Risk appetite remains high with commodities, Asian and European equities higher and peripheral bond markets have received a bid and seen yields fall due to optimism on the Greek vote.

Cross Currency Rates

The governor of the Bank of Greece said overnight that Greece would be committing ‘suicide’ if the parliament does not vote for the harsh austerity and privatizations measures today (1300 GMT).

The vote is expected to be close with many Greek parliamentarians and the Greek people feeling that it is unfair to Greece and will only serve to postpone the day of reckoning.

Gold in Swiss Francs – 2 Years (Daily)

Gold and Silver Ownership and Prices Will Not be Affected by Dodd-Frank Legislation on July 15

The 2010 Dodd-Frank Act, and the regulatory legislation associated with it, is due to come into law in just over two weeks on July 15.

A number of clients, particularly U.S. clients, have contacted us regarding the possibility that the new legislation could lead to price falls in the gold and silver markets. Some were even concerned that it had implications for their ownership of physical coins and bars and for bullion stored in Western Australia, Switzerland and vaults internationally.

Concerns arose due to reports that retail foreign exchange, spread betting and CFD providers are set to discontinue offering their gold and silver over the counter products. These allow speculators to take leveraged positions, short and long, in over the counter derivative products.

After July 15, U.S. residents are prohibited from trading these OTC gold and silver derivative products. All precious metal transactions that are leveraged and not delivered in 28 days, must be conducted in a “designated contract market,” a board of trade or exchange designated by the CFTC.

Those who own bullion should be reassured that their bullion ownership will not be affected as the legislation does not apply to the physical coin and bar market. 

The legislation will also not apply to contracts fully paid for or delivered within 28 days, and commodity futures contracts trading on an exchange such as the CME Group CME and the many other international exchanges.

With regard to prices, some are concerned that there could be spillover from the OTC derivative market into the futures and physical market. This is because the residual risk from OTC markets is hedged on the various precious metal exchanges. Thus, some are concerned that the unwinding of OTC positions by U.S. residents could put result in falling gold and silver prices.

We believe this to be very unlikely. We acknowledge that it may lead to an increase in volatility in the coming days and in the days preceding July 15th. 

However, the off exchange derivative market is very small when compared to the global physical bullion market (coins, bars and London Good Delivery Bars) and the futures market internationally (New York Mercantile Exchange (NYMEX), COMEX Division; Tokyo Commodity Exchange (TOCOM); Dubai Multi Commodities Centre (DMCC); Shanghai Gold Exchange (SGE) etc..

OTC derivatives are used primarily by retail speculators and are not important from a price discovery point of view. Also, those using these derivatives were not buyers or long exclusively and many will have been shorting the market. Thus the hedging of product providers is likely to be reasonably neutral.

In conclusion, gold and silver bullion ownership and prices should not be affected by the upcoming Dodd-Frank legislation.

Prices are far more likely to be influenced by central banks increasing favorability towards gold as a reserve asset. UBS reported that gold will be the best performing asset for the rest of the year, citing their survey of sovereign institutions. It showed that the previous intention of central banks to reduce holdings within 10 years has disappeared.  

The majority of central banks internationally intend increasing allocations to gold. This is not surprising given that the Federal Reserve, the BOE and the ECB are continuing to debase the major reserve currencies. It is also very understandable given increasing concerns about the U.S. dollar remaining the reserve currency of the world.

China Gold Imports Surge – Estimated at 200 Tonnes in 2011 YTD; Compared to 250 Tonnes in All of 2010

The Financial Times today confirms surging demand from China. “Some traders estimate that the country may already have imported more than 200 tonnes of gold this year, compared to total imports last year of about 250 tonnes – itself a more than fourfold increase on 2009.”

It is safe to assume that the unnamed traders are credible sources as these figures coincide with what industry experts in China and the World Gold Council are saying about surging Chinese gold demand.

Central bank demand from China and internationally and investment demand from China, Asia and internationally will ultimately be the primary driver of the gold market in the coming months and possibly years.

Government legislation of any nature may impede in the short term but ultimately the law of supply and demand will be the ultimate arbiter of price.

SILVER 
Silver is trading at $34.34oz,€23.79/oz and £21.43/oz. 

PLATINUM GROUP METALS 
Platinum is trading at $1,708.50/oz, palladium at $742/oz and rhodium at $1,925/oz. 

NEWS

(Financial Times) 
Gold, silver and oil in demand

(Reuters) 
Gold edges up on Greece vote hopes, Asian buying

(Bloomberg) 
Gold May Advance on Greek Protests, Strike Before Government Votes on Cuts

(Bloomberg)
South Africa Mines Nationalization Talk May Cut Output

(Forbes)
No $2000 Gold Without QE3, BofA-Merrill Says

COMMENTARY
(LewRockwell)
Can the Fed End the Crisis?

(GoldSeek) 
World Production of Gold, 2011: Peak or the End of a Cycle

(The Market Oracle) 
How Does the Eurozone Crisis Boost Gold and Silver?

(The NY Sun)  
A First Step To Sound Money

(Financial Times) 
Dollar seen losing global reserve status

 

 

Mark O'Byrne

Also on news-goldcore-com

Videos

Episode 5 of The M3 Report with Steve St Angelo

What we can Learn from the International Gold Market

Jim Rogers Interview 2022

Blog posts

Ross Geller inspires Bank of England policy

This morning the UK pound slumped as one of the world’s oldest central banks pressed hard on the panic button. The Bank of England was seen to be shouting ‘Pivot! Pivot! Pivaat!’ as they announced they would temporarily suspend their programme to sell gilts and will instead buy long-dated bonds.  In a statement, the bank […]

READ MORE

Episode 5 of The M3 Report with Steve St Angelo

Is the energy crisis something that can be resolved? Was it always inevitable? Will renewable energy make it all OK? Are Western financial policies to blame? All this and more in today’s The M3 Report! If you’re not already subscribed to GoldCoreTV then click here right now to make sure you’re all set to watch the fifth […]

READ MORE

Brace Yourself for the Impact

Fed’s message this week – higher rates, lower economic growth, higher unemployment. The Fed hiked interest rates by 75 basis points for the third straight meeting and the statement said that the committee anticipates further increases. The Summary of Economic Projections (SEP) showed that the median projection is for a further 1.25% increase by yearend. […]

READ MORE

Featured

Rick Rule- Should You Invest In Gold 2022

READ MORE

Jim Rogers- The Worst Bear Market is Coming

READ MORE
Newsletter
Category
Archives
Popular

No posts available

Videos

Episode 5 of The M3 Report with Steve St Angelo

What we can Learn from the International Gold Market

Jim Rogers Interview 2022

Blog posts

Ross Geller inspires Bank of England policy

This morning the UK pound slumped as one of the world’s oldest central banks pressed hard on the panic button. The Bank of England was seen to be shouting ‘Pivot! Pivot! Pivaat!’ as they announced they would temporarily suspend their programme to sell gilts and will instead buy long-dated bonds.  In a statement, the bank […]

READ MORE

Episode 5 of The M3 Report with Steve St Angelo

Is the energy crisis something that can be resolved? Was it always inevitable? Will renewable energy make it all OK? Are Western financial policies to blame? All this and more in today’s The M3 Report! If you’re not already subscribed to GoldCoreTV then click here right now to make sure you’re all set to watch the fifth […]

READ MORE

Brace Yourself for the Impact

Fed’s message this week – higher rates, lower economic growth, higher unemployment. The Fed hiked interest rates by 75 basis points for the third straight meeting and the statement said that the committee anticipates further increases. The Summary of Economic Projections (SEP) showed that the median projection is for a further 1.25% increase by yearend. […]

READ MORE

Featured

Rick Rule- Should You Invest In Gold 2022

READ MORE

Jim Rogers- The Worst Bear Market is Coming

READ MORE