Gold trading is subject to an intricate system of laws which regulate both its financial and physical aspects.
Investors purchase and sell bullion directly, or invest indirectly through exchange-traded funds (ETFs) and mining stocks. Investors are subject to regulation by various bodies such as the Securities and Exchange Commission in the US or FCA in the UK.
Federal Government
Even though gold mining and trading is an international industry, no central international agreement governs it. Instead, mining companies abide by 19th-century laws and environmental rules; dealers face financial regulations and marketing rules.
Due to limited federal regulation on precious metals dealers, their advertising and sales tactics can vary substantially from those used by traditional retailers. They frequently employ celebrity endorsements, testimonials from clients, paid placement on conservative news outlets such as Sean Hannity’s and Mark Levin’s radio shows as an effective strategy to attract investors; for example Safeguard Metals advertised on both shows before being charged with fraud by SEC and CFTC in 2020; Fisher Capital featured Fox News anchor and Trump administration aide as part of their marketing video as an added persuasion strategy to attract investors;
Under the USA Patriot Act, precious metal and gemstone dealers must establish anti-money laundering programs to comply with regulations imposed under that act. FinCEN has published FAQs that help these dealers understand these requirements.
State Government
Regulation of gold can differ across the nation. Physical precious metal dealers are overseen by the Commodity Futures Trading Commission and local state departments of financial regulation to combat fraud; while the Securities and Exchange Commission monitors publicly traded mining companies and gold-related businesses. Furthermore, the CFTC enforces market manipulation laws while simultaneously supporting fair commodity and financial futures markets.
Some precious metals dealers can get around regulations by acting as brokers and advisers, marketing their goods as investment advice or encouraging investors to open self-directed individual retirement accounts (SDIRAs). Unfortunately, this practice is illegal and could put the dealer in serious hot water with both the CFTC and SEC.
Safeguard Metals employed this strategy to attract investors by targeting conservative political talk shows such as Sean Hannity and Mark Levin, according to a 2020 CFTC and SEC complaint. Before making your investment with any metals dealer, make sure they are registered with both agencies as well as searching online for any disciplinary histories related to them.
Local Government
Gold mining may technically be legal in various countries, yet most African ASGM activities remain informal as formalization pathways often prove complex or expensive; furthermore they often fail to take account of local realities and are vulnerable to corruption. Formalizing ASGM trade could mitigate potential harms while yielding economic advantages for communities and economies alike.
Retail metal dealers may not be subject to federal oversight and therefore must remain vigilant in order to verify that their dealers are not trafficking conflict gold or using forced labor. Dealers should consult consumer organizations as well as conduct an online search of any potential vendors with a history of complaints or criminal records.
Recycled gold buyers must ensure that recyclers do not introduce conflict-mined or otherwise high-risk gold into their supply chains by labeling newly refined gold as “recycled.” Individuals and entities conducting business with, providing assistance or technological support for individuals or entities sanctioned under international sanctions may expose themselves to punishment.
Private Sector
Private businesses operating within capitalist economies to make profits still must comply with laws and regulations, especially those involved with mining or trading gold.
Mining companies require teams of lawyers familiar with national and foreign environmental laws. Furthermore, permits must be secured in each country where operations take place before negotiating with regulatory agencies to ensure operations meet local requirements.
Precious metals dealers are not subject to the same regulatory scrutiny as ETFs or mutual funds, making marketing efforts for these dealers far less stringent than for ETFs and mutual funds. Many use celebrity endorsements or client testimonials as tools of persuasion when marketing themselves and they often target older, politically conservative investors concerned about government actions on retirement savings accounts. Safeguard Metals – an LA dealer facing fraud charges by both SEC and CFTC in 2020 – found leads by advertising on conservative radio shows hosted by Sean Hannity and Mark Levin.
