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New York. US futures regulators set their sights on precious metals markets this week after unveiling plans to limit positions in energy contracts, but gold and silver trading will be harder to control.

Commodity Futures Trading Commission chairman Gary Gensler said the CFTC would discuss possible position limits on gold and silver contracts at a March meeting.

The CFTC, the top US futures market regulator, earlier this week unveiled proposals to limit trading of energy contracts.

Unlike crude oil and gas futures — which are in effect benchmarks for global prices — COMEX precious metals contracts are a small part of the gold and silver trade.

The CFTC is ultimately powerless to control the large physical market overseas that dominates overall trade.

“Precious metals are huge international markets because there is a lot more trading outside the US, particularly in the physical market,” Bill O’Neill of Logic Advisors in New Jersey said. “I really don’t think it will have much of an impact.”

Trading volume of the US futures market was relatively small compared with volume of over-the-counter physical bullion in Europe and Asia, analysts said.

George Gero, vice president at RBC Capital Markets Global Futures, said the long-term price effect would be minimal. “The metals are internationally priced and they are highly liquid, and certainly, the supply of metals is very large,” Gero said.

Martin Murenbeeld, chief economist at DundeeWealth in Vancouver, said public scrutiny of gold and silver trading was minor compared with oil and energy markets, which could have an oversized impact on the global economy.

“My guess is that the CFTC is reviewing every commodity that is traded, much like screening on the airplane. It wants to be politically correct,” Murenbeeld said.

Murenbeeld said wealthy investors who wanted to circumvent limits on gold and silver positions could use other products such as the exchange traded funds, which back each security issued with physical stocks of a given commodity.

“Position limits will not be meaningful because you won’t have the limits in London, Zurich, Singapore and other major physical gold markets,” Gero said.

Analysis

Reuters