By Dan Popescu - Gold & Silver
Analyst for Goldbroker.com
The Volcker Rule, forbidding the largest U.S. banks from trading with
their proprietary accounts, has just been approved and will take effect on
April 1st, 2014. What impact will it have on the gold and silver markets?
According to Jeffrey Nichols of Nicholsongold.com in his most recent
bulletin, the rule will have important implications because it forbids U.S.
banks with federally- guaranteed deposits to do trading operations for their
proprietary accounts. This means that U.S. banks, including Goldman Sachs and
JP Morgan, will be forbidden from trading gold and silver for short-term
speculative gains in their own accounts (futures and options). From now on,
they will only be permitted to do so on behalf of their clients.
According to Nichols, the downward pressure on the gold and silver prices
in the last year and a half comes in large part from huge proprietary account
trading operations done by those banks, both on the regulated and
non-regulated (OTC) markets. A great proportion of those dark pool operations
happen without being noticed by most market observers and participants, or
even by the regulating organisms.
Jeffrey Nichols tells us that we shouldn’t underestimate the impact those
operations have on the price of gold and silver, either going up or going
down. Their eventual absence will make room for gold and silver fundamentals
to have much more impact on the price than in the past.
Even if the rule is only to be implemented on July 21, 2015, banks have to
demonstrate their good faith and intention to abide by the new rule by
regularly communicating to the regulating authorities any related
information.
Dan Popescu - Gold & Silver Analyst for Goldbroker.com
Twitter: @PopescuCo
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