Gold And Silver Ownership And Prices Not Be Affected By Dodd-Frank Legislation On July 15

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From Gold Core

Gold and Silver Ownership and Prices 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 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