gene arensberg writes that if the cftc does enact new positions limits, the new rules will only affect the longs, not the shorts who have rigged the game. unfortunately, that has the ring of truth to it. i hope i'm wrong, but it's hard to imagine the gold cartel giving up its meal ticket.

While some commentators were hopeful that the new speculative limits would be applied equally to both sides of the trading battlefield, (both speculators and hedgers), it is crystal clear, both from the documents and from comments by the Commissioners, that the Commission intends to maintain exemptions to the limits for the largest hedgers and short sellers of energy futures (as was our suspicion in previous commentary on the subject last year).

If this same formula were adopted by the Commission for the metals complex later this year, it would have minimal, if any effect on the very concentrated positioning of a few very large, dominant players on the short side of the market in gold and silver. Instead, the effect would be to limit most traders on the long side of the battlefield somewhat, but continue to favor those very large traders who claim “bona fide hedging” with no real effective limits. For example, Swap Dealers would be limited to no more than twice the speculative limit even with an exemption, but bona fide hedgers would not be limited as such.

When the Commission meets to discuss precious metals in March, they may still be under the mistaken impression that investors are worried about the “excesses caused by excessive speculation,” which was the driving force behind their energy market initiative. Instead, what the Commission should be focused on in March should be the overwhelming and commanding position which is currently held by one or two U.S. banks. The banks are able to amass very large positions in excess of the exchange-set position (and accountability) limits because they take advantage of exemptions from those limits as bona fide hedgers.