No more OTC precious metals (gold, silver, etc) for mundanes

[eproxy100]

This has been posted on the economics forum already but I feel it's too important to not post in general politics.


Just got a notice in the mail from my Forex broker. Apparently it is illegal to trade currencies against precious metals now. What a good way to show how safe the dollar is.

From Forex.com:

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 at the close of trading at 5pm ET. As a result, all open metals positions must be closed by July 15, 2011 at 5pm ET.

When I got the notice I immediately thought of your blog, so I decided to share the news.

http://www.lewrockwell.com/blog/lewrw/archives/89868.html

BTW, banks and their executives will still be allowed to.

[newyearsrevolution08]

now this is SERIOUS

I want to re reference this on a few places.

any other news on this please post it

[eproxy100]

I actually read it on the comments section here - http://www.zerohedge.com/article/guest-post-what-writing-book-taught-me-about-obama-and-those-who-followed-him

You'll probably be able to find the corresponding law based on the comments.

[Anti Federalist]

The prohibition of Section 742(a) does not apply, however, if such a transaction results in actual delivery within 28 days, or creates an enforceable obligation to deliver between a seller and a buyer that have the ability to deliver, and accept delivery of, the commodity in connection with their lines of business.

From:

http://fx-knight.com/smForum/index.php?topic=1290.0

So if you take delivery within 28 days there are no issues with folks buying silver and gold...

///

[tangent4ronpaul]

The prohibition of Section 742(a) does not apply, however, if such a transaction results in actual delivery within 28 days, or creates an enforceable obligation to deliver between a seller and a buyer that have the ability to deliver, and accept delivery of, the commodity in connection with their lines of business.

Assuming mail order was still OK, that means no transactions without a paper trail. But no worries, I mean the US Gvmt would never confiscate gold and silver... Oh Wait!



I think "in connection with their lines of business" is the key phrase here.

Jeweler - fine
scientist w/ electron microscope - fine
electronics fabrication - fine
individual purchasing as an investment - NOT FINE!

-t

[Freedom 4 all]

Drive to Canada and buy a shitload. It's still legal here, and requires no ID for cash purchases of gold, silver, platinum, or palladium under either $3000 or $4000 (I forget which).

[tangent4ronpaul]

US’s Dodd-Frank law ‘stigmatising’ African gold
http://www.miningweekly.com/article/uss-dodd-frank-law-stigmatising-african-gold-2011-06-17

The US’s Dodd-Frank Act, which allows consumers to know if human rights atrocities have tainted their gold, is not intended to hurt ethical African gold miners, says US Assistant Secretary of State for Economic, Energy and Business Affairs Jose Fernandez.

Fernandez was responding, at the Gordon Institute of Business Science, in Johannesburg, to AngloGold Ashanti sustainability manager Jessica van Onselen, who said that electronics giants like Apple, Intel and Motorola intended giving African gold a wide berth to avoid the onerous implications of the Dodd-Frank law.

“We’re very concerned about the stigmatisation of African gold and what that piece of legislation does to such a vital industry on the African continent,” Van Onselen said.

There is concern that Dodd-Frank may result in an increasing number of American gold users steering clear of African gold in order to avoid the red tape involved in its use.

JSE- and NYSE-listed AngloGold Ashanti, which is South Africa’s largest gold-mining company, has a sizeable exploration pro- gramme in the Democratic Republic of Congo (DRC), to which the US law makes specific reference. The company is also partnering the LSE-listed Randgold Resources, at Kibali, in the eastern DRC, where a large gold deposit is being developed.

In the same way the Kimberley Process aims to eradicate ‘blood diamonds’, Dodd-Frank seeks to cut off the source of finance to warlords from ‘conflict’ gold, wolframite and cassiterite, which are used in electronics, jewellery, construction tools, weapons systems and aerospace technology.

Section 1502 forces the US Securities and Exchange Commission to impose disclosure and, in some instances, auditing requirements on publicly traded companies that use ‘conflict minerals’ to manufacture their products.

[tangent4ronpaul]

http://www.fxstreet.com/education/markets-regulation/us-markets-on-new-regulation/2010/08/06/

Andrei Knight, Sr. Currency Strategist at fxKnight.com

These new regulations basically confirm what we already knew last year (since the passage of 2008's Farm Act, technically - but enforcement really began in earnest last year) - that retail Forex (and spot metals trade) is essentially DEAD in the United States. They basically just tightened up some language which was still open to interpretation, closed the loose ends.

The Dodd-Frank Wall Street Reform Act in a nutshell:

No over-the-counter foreign currency transactions, unless it is through a government-approved agency. Changing money for travellers good, speculation bad.
No spot metals transactions, unless you plan to take delivery within 28 days.
The "under 15 clients" exception for money managers and financial advisers is now removed.

As I've been saying all along, if you want to trade this stuff in the U.S., the CFTC very much wants you to purchase futures contracts from the CME (who authored much of the new legislation) - never forget Chicago's mob history, they don't like their monopolies disturbed. (Say, what's Obama's home state again?)

To this end, fxKnight is in the process of forming strategic partnerships with attorneys, firms, and brokers in key international financial centers in order to assist our American clients with forming corporations and trusts abroad, and moving their trading operations offshore.

...

Two specific changes deal with the spot market: Section 742 of the Act deals with retail commodity transactions. In this section, the text of the Commodity Exchange Act is amended to include new Section 2(c)(2)(D) (dealing with retail commodity transactions) and new Section 2(c)(2)(E) (prohibiting trading in spot forex with retail investors unless the trader is subject to regulations by a Federal regulatory agency, i.e. CFTC, SEC, etc.).

============
http://www.fxstreet.com/education/markets-regulation/obama-forex-otc-gold-trading/2010/08/05/

Obama Threatens Forex; Says Goodbye to OTC Gold Trading

Elimination of OTC Metals
As for OTC precious metals such as gold or silver, Section 742(a) of the Act prohibits any person [which again includes companies] from entering into, or offering to enter into, a transaction in any commodity with a person that is not an eligible contract participant or an eligible commercial entity, on a leveraged or margined basis. This provision intends to expand the narrow so called “Zelener fix” in the Farm Bill previously ratified by congress in 2008. The Farm Bill empowered the CFTC to pursue anti-fraud actions involving rolling spot transactions and/or other leveraged forex transactions without the need to prove that they are futures contracts. The Dodd-Frank Act now expands this authority to include virtually all retail cash commodity market products that involve leverage or margin – in other words OTC precious metals.

The prohibition of Section 742(a) does not apply, however, if such a transaction results in actual delivery within 28 days, or creates an enforceable obligation to deliver between a seller and a buyer that have the ability to deliver, and accept delivery of, the commodity in connection with their lines of business. This may be problematic as in most spot metals trading virtually all contracts fail to meet these requirements. As a result, although the courts’ interpretation of Section 742(a) is unknown, Section 742(a) is likely to have a significantly negative impact on the OTC cash precious metals industry. Here too, it is essential that those who offer to be a counterparty to OTC metals transactions seek professional help to discuss possible operational and regulatory contingency plans.

[Brian4Liberty]

As I've been saying all along, if you want to trade this stuff in the U.S., the CFTC very much wants you to purchase futures contracts from the CME (who authored much of the new legislation) - never forget Chicago's mob history, they don't like their monopolies disturbed. (Say, what's Obama's home state again?)

Follow the money. Who benefits from this? No doubt Goldman Sachs and/or JP Morgan also have their interests in this.

It looks like it is about leveraging or margining. If this only applies to mundanes and doesn't apply to the Corporatists, that's a big problem.

[Vessol]

If this is true, this is huge. Any more news from other dealers?

[Kylie]

So can anyone put this in laymans terms?

No more paper trading, but you can still buy physical PMs?