Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
Currency trading site Forex.com sent out the following notice to traders this week, informing them that the Dodd-Frank Act's ban on the over-the-counter trade of precious metals will be going into effect tomorrow.
We wanted to make you aware of some upcoming changes to FOREX.com’s product offering. As a result of the Dodd-Frank Act enacted by US Congress, a new regulation prohibiting US residents from trading over the counter precious metals, including gold and silver, will go into effect on Friday, July 15, 2011.
In conjunction with this new regulation, FOREX.com must discontinue metals trading for US residents on Friday, July 15, 2011. As a result, all open metals positions must be closed by July 15, 2011 at approximately 2pm EST.
We encourage you to wind down your trading activity in these products in anticipation of the new rule. Any XAU or XAG positions that remain open at approximately 2pm EST on July 15, 2011, will be automatically liquidated.
This Dodd-Frank provision, though ostensibly intended to curtail over-the-counter derivatives trading of the sort that led to the financial meltdown when AIG was unable to meet its obligations, significantly limits the freedom of smaller traders and investors to participate in the precious metals market. According to my source in the foreign exchange community, the prohibition on trading gold against the dollar and other currencies has got traders riled up and suspecting ulterior motives.
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Jul '11
Re: Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
Didn't the Federal Government do this once before? I seem to recall owning/trading/dealing in Gold was once illegal here. Why on Earth would we want to go back to that?
ADDED:
Thank you Diane for the clarification. I still don't know how to feel about this.
Edited on Jul 14, 2011 at 1:09pmRe: Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
Yes, the government made owning gold illegal in 1933. This Dodd-Frank provision isn't quite the same thing. Folks will still be able to buy and own physical gold coins and bullion, but they won't be able to say, speculate on how the dollar will be behave against gold using things like futures contracts.
Jul '10
Re: Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
This is what happens when we have economic illiterates pushing 800-page bills that other economic illiterates don't bother to read.
Jun '11
Re: Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
Unbelievable.
Orwellian.
Why metals? Why not the S&P contract? Or oats?
Re: Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
michael kelley: Unbelievable.
Orwellian.
Why metals? Why not the S&P contract? Or oats? · Jul 14 at 1:19pm
Exactly. Why?
Re: Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
Diane Ellis, Ed.
michael kelley: Unbelievable.
Orwellian.
Why metals? Why not the S&P contract? Or oats? · Jul 14 at 1:19pm
Exactly. Why? · Jul 14 at 1:22pm
I don't have experience with forex, but my hunch is that someone intended this provision to manipulate confidence in the dollar. That said, the Dodd-Frank Act only affects what traders in America can and can't do, and not traders in the rest of the world, so if this were really the intention, it would not be all that effective.
May '10
Re: Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
Not true! We still have bunches of billboards around here proclaiming "We Buy Gold". From pawnshops, but still, bet they sell it too. These people are creating an underground economy and a nation of scofflaws.
Aug '10
Re: Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
Why do I feel the need to watch Goldfinger ?
Jun '10
Re: Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
Given the volume and persistence of paid advertising pushing people to buy gold it must be working. People are buying physical gold while it is at historic highs and have been for several years. I'm not sure that type of buyer would, but now they can't hedge the bubble burst.
Dec '10
Re: Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
Oh - so it's just the speculators? Great. Now we'll be running blind when the dollar collapses. Apart from Obama, Reid and Pelosi, and now that Kennedy's dead, the two most destructive Democrats in America are Dodd and Frank. And instead of being behind bars where they belong, they're sitting pretty in Congress. We are so scr... messed up.
Jun '11
Re: Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
Diane Ellis, Ed.
Diane Ellis, Ed.
michael kelley: Unbelievable.
Orwellian.
Why metals? Why not the S&P contract? Or oats? · Jul 14 at 1:19pm
Exactly. Why? · Jul 14 at 1:22pm
I don't have experience with forex, but my hunch is that someone intended this provision to manipulate confidence in the dollar. That said, the Dodd-Frank Act only affects what traders in America can and can't do, and not traders in the rest of the world, so if this were really the intention, it would not be all that effective. · Jul 14 at 1:27pm
And I am not up on the stats at the moment but the percentage of open interest accounted for by "residents" (as opposed to traders who are trading a book on behalf of a firm) has got to be tiny.
So why bother regulating this at all?
This from the same government that was a massive seller of bullion in the 90's before the metal began its multi-year bull market advance.
Mar '11
Re: Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
I was trying to think of a joke involving waitress sandwiches and basements, but it would probably violate a CoC.
As the Instapundit would say, the country is in the best of hands.
Edited on Jul 14, 2011 at 2:13pmJun '11
Re: Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
Diane Ellis, Ed.
Diane Ellis, Ed.
michael kelley: Unbelievable.
Orwellian.
Why metals? Why not the S&P contract? Or oats? · Jul 14 at 1:19pm
Exactly. Why? · Jul 14 at 1:22pm
I don't have experience with forex, but my hunch is that someone intended this provision to manipulate confidence in the dollar. That said, the Dodd-Frank Act only affects what traders in America can and can't do, and not traders in the rest of the world, so if this were really the intention, it would not be all that effective. · Jul 14 at 1:27pm
And also, why is the XAU included there? It's an Index Option, not a futures contract.
Re: Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
michael kelley
And also, why is the XAU included there? It's an Index Option, not a futures contract. · Jul 14 at 2:15pm
The ban includes options and futures -- any trade of precious metals occurring over-the-counter and not on an exchange.
Jun '11
Re: Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
Diane Ellis, Ed.
michael kelley
And also, why is the XAU included there? It's an Index Option, not a futures contract. · Jul 14 at 2:15pm
The ban includes options and futures -- any trade of precious metals occurring over-the-counter and not on an exchange. · Jul 14 at 2:33pm
Just doing some quick research (you gotta love the internet). It looks like part of a much wider regulatory move:
http://www.hedgefundlawblog.com/dodd-frank-establishes-new-laws-regarding-spot-commodities-and-spot-forex.html
Sorry if the link is dead - I couldn't figure out how to insert a hyperlink (where is Al Gore, the Inventor of the Net, when I need him?)
Oct '10
Re: Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
This is, of course, an utterly stupid and counterproductive bill whose consequences will be to make it more difficult for individuals of modest means to shelter themselves from the consequences of monetary folly. But then you already knew that just from the names of the legislation's co-authors.
That said, there is a lot of misinformation and hyperventilating about the consequences of this act. You can still buy and sell precious metals for cash without any restrictions. You can buy them beneficially through exchange-traded funds such as GLD and SLV on the New York Stock Exchange. And you can trade exchange-listed options and futures. It is only over the counter derivatives which are restricted to “qualified eligible participants” or, as we say outside the Beltway, “the rich”.
For beginners, here are a couple of tutorials I penned back in 2008 about why you might want to own gold and the various options for including it in a portfolio.
Dec '10
Re: Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
This is just the beginning.
The idea is to funnel all the easily traded money into a few big pots, which makes it easier to both keep track of, and manipulate.
Keep your eyes peeled for sneaky regulations aimed at buying/selling physical gold and silver, 'cause they're on their way.
This whole big project to eliminate the middle class doesn't work if those people can shelter their wealth from the destructive effects of inflation in physical assets like precious metals.
I'm not quite into the middle class, so I put my hedges into different metals: cast iron, mild steel, brass, copper, lead, and alloy steel.
Oct '10
Re: Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
Did you know that you can go to the bank and get as many 1946–2011 “nickels“ (U.S. five cent pieces) as they'll give you at a face value of US$0.05 each? Each of these coins, composed of 75% copper and 25% nickel, with a total mass of 5 grams, has a melt value as of today of US$0.066, or a premium of around 32% above face value, which is a floor on the value of the coin.
It's just like sliver in 1963.
Once a sufficient number people realise this, you'll see the headlines about the “nickel shortage“ and the new, improved steel nickel. But by then, your basement will be full of the real ones….
Edited on Jul 15, 2011 at 5:53amJul '11
Re: Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
Anyone see Ron Paul abusing Ben Bernanke on whether gold is money just this week?
Strange to see the most dangerous man in the world squirm for 5 minutes.
May '11
Re: Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
Huh? How can something as momentous as this not be big news? This is the only place I've seen this. Or am I missing a joke?