Gold/Silver Manipulation Claims To Be Aired at CFTC Hearing
Source: Reuters, Frank Tang and Christopher Doering (3/23/10)
"Metal traders are concerned CFTC limits could sharply reduce liquidity."
The CFTC will hold a day-long hearing to a rule is needed to create speculative position limits for gold, silver and copper markets to prevent price manipulation.
Commissioners will hear from metals markets players who oppose position limits and are expected to argue that limits will drive trade to unregulated or overseas markets.
A group of gold and silver "bugs" who believe governments and banks artificially depress precious metals prices will ask the commission to prevent price manipulation in metals markets.
Bart Chilton—one of five CFTC commissioners and the most outspoken in favor of position limits across all commodities of finite supply—tamped down support for metals curbs ahead of the hearing, but said he remained optimistic.
"At this point I don't think there is support on the commission," Chilton said in an interview with Reuters.
"I hope this (hearing) will be educational, informative and it may shift opinions in favor of position limits for metals."
Traders Worry Limits Could Hurt Markets
Outside this group, there has been little public outcry and political pressure for curbs on gold and silver speculation.
Metal traders are concerned CFTC limits could sharply reduce liquidity.
Less liquidity would hurt producers and users who use the markets to hedge their physical risk, said Bill O'Neill of LOGIC Advisors, a commodities consultant.
"I don't expect the CFTC to take any dire actions that will inhibit trade," O'Neill said.
Gold and silver are mainly seen as investment vehicles. That could make it hard for the CFTC to clamp down on speculation, said Michael Greenberger, a law professor at the University of Maryland and a former CFTC official.