Who Regulates Gold Trading?
The gold market is subject to various international laws regulating its operation, covering financial, physical, and human aspects of this industry. The LBMA assists its members in complying with these regulations through proactive advocacy efforts.
Gold dealers can use celebrity endorsements and client reviews to boost their credibility with older, politically conservative investors who fear any government actions that may erode their retirement savings.
Federal agencies
Gold trading in the United States is overseen by numerous agencies. This includes the Securities and Exchange Commission, Commodity Futures Trading Commission and Bureau of Land Management. Furthermore, many of these bodies impose environmental rules regarding mining and trading within their borders.
Federal agencies can also play an essential role in ensuring the gold trade is fair and transparent, through sustainable production chains, multi-stakeholder dialogue and development cooperation initiatives, which help combat human rights exploitation by gold-mining companies.
Some federal agencies have also provided guidance for doing business in Africa. This includes the US Departments of State, Treasury, and Labor as well as an advisory known as Africa Gold Advisory that highlights opportunities and risks in sub-Saharan African gold trade as well as encouraging industry participants to adopt strengthened due diligence practices as well as supporting artisanal and small-scale mining operations.
State agencies
Gold trading is subject to various rules and regulations worldwide that aim to promote transparency, reduce fraud and safeguard consumers.
Gold trading is popular with investors of all sizes as an investment strategy to capitalize on price movements and diversify portfolios. Central banks also use physical gold to help stabilize their currencies and hedge against geopolitical concerns, providing gold traders the ability to gain exposure without necessarily owning actual metal through trading on a regulated exchange.
If you want to sell gold or silver to others in the United States, self-regulatory organizations such as National Futures Association (NFA) require membership and license from your state. Unfortunately, however, some sellers use radio, TV and Internet advertisements or telephone “cold calls” to lure potential investors in precious metal investments; according to CFTC claims this practice often makes false or misleading claims, including promises that initial investments could double or even triple within just two or three months.
International agencies
The global gold market is governed by laws designed to safeguard both its integrity and the traders who trade on it. These regulations cover all market participants – from financial institutions and refiners, mining companies and producers of physical goods; to financial institutions, refiners and refiners themselves. LBMA offers resources designed to assist industry players in complying with these regulations.
Malign actors take advantage of vulnerabilities in the gold supply chain to finance their activities, particularly those occurring in conflict-ridden regions of sub-Saharan Africa. This includes armed groups hostile to U.S. interests such as jihadists or Wagner Group mercenaries led by Yevgeny Prigozhin.
These risks can be addressed by conducting enhanced due diligence to identify and mitigate illicit activity risks. This practice should be practiced by all industry players – especially those operating within the gold sector and their trading partners – who fail to do so may face severe financial and reputational repercussions as well as sanctions or other consequences.
Individuals
If you are considering the purchase of raw bullion such as gold coins and bars, be wary of premiums, fees and commissions as they could quickly diminish your investments. In addition, be mindful that some sellers and companies may not be properly regulated. Reaching out to the Commodity Futures Trading Commission, (CFTC), can provide more insight. All transactions of commodities – including gold – are heavily regulated by the federal government, including through its oversight of gold futures trading in New York by this CFTC agency. SEC also regulates ETFs and mutual funds that hold gold stocks as well as mining companies with shares issued to shareholders. Recently, blockchain technology could prove valuable in improving regulation by providing secure mining operations with traceable gold tracks from source to destination.
Avoid purchasing precious metals from sellers who rely heavily on testimonials and endorsements in their marketing. Such sellers are likely boiler-room telemarketers without sufficient professional credentials to offer trade, investment or tax advice.
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