Bracing For Position Limit Talk in Metals (GLD, SGOL, SLV, CME)

When oil was targeted by the CFTC for position limits, many did not want to believe that this would come to the gold market and to other metals.  We believe that this is coming.  Today there will be presentation at the CFTC  on limiting positions in metals.  That includes gold, silver, and other metals seen as inflation gauges.  We will be watching the SPDR Gold Shares (NYSE: GLD), iShares Silver Trust (NYSE: SLV), and the ETFS Gold Trust ETF (NYSE: SGOL) closely today.

The obvious target is speculation, or excessive speculation, in the commodities markets after we saw oil run well over $100 on speculation and asset buying that had little to do with real supply and demand.

Very few of today’s speakers are expected to offer support for any limits on the size of metals ownership, although that can only be expected.  CME Group Inc. (NYSE: CME) previously gave qualified support for position limits in energy but it is not expected to back the same mechanism is gold.  Some argue that US position limits in a market that is so global would drive away business from U.S. exchanges to less regulated or to unregulated markets that are outside of the US.

CFTC Chairman Gary Gensler is expected to say that the CFTC is only still considering metals position limits.

It is also expected that some will say that there is no economic model proving that imposing metals trading limits will curb prices, and many will argue that it will fly against price-discovery.

The CFTC has never proven that excessive speculation alone caused the ridiculous record oil prices back in 2008 and it is safe to assume that the same point will be made about gold and other metals.  The CFTC launched a silver probe in 2008 but the findings have not been announced that we have seen.

The SPDR Gold Shares (GLD) is up 0.6% at $106.98, the ETFS Gold Trust ETF (NYSE: SGOL) is up 0.55% at $109.03, and the iShares Silver Trust (SLV) is up 0.9% at $16.44.

JON C. OGG