Montreal, Canada

Starting last summer, the Commodities Futures Trading Commission, or CFTC, began to debate new position limits on traders and speculators in the energy complex. Regulators blame the big spike in commodities in 2008 on hedge funds and other speculators and have decided to impose limits on contracts.

Anticipating this change, several energy-focused funds and ETFs adjusted their position sizes in oil and natural gas to reflect an anticipated change in trading limit guidelines. But by encouraging less speculation, the CFTC is driving business away from the CME in Chicago, NYMEX in New York (owned by the CME) and other exchanges in the United States to Europe and Asia where limits have not been imposed.

Data from British regulators confirm that price spikes in oil and gas were barely attributed to speculators and therefore have refused to follow the CFTC. London, also a major commodity trading center, will benefit the most as a result of new CFTC guidelines. Amazingly, a similar study conducted by U.S. officials delivered the same verdict; yet legislation followed anyway.

Last week the CFTC announced fresh limits to curb speculation in energy markets.

Importantly, despite a public inquiry on the subject last fall, the CFTC and the government still believe that speculators caused most of the crude oil super-spike in 2008 before prices crashed in July of that year. For now, the new position limits only affect energy commodities like crude oil, natural gas, heating oil and gasoline.

But traders are worried that the CFTC might also include limits on contracts based on copper, gold and silver. All three metals remain in a secular bull market since 2002.

Increasingly, it would seem the government is intent on curbing speculation and contract ownership of core commodities. The new laws come with controversy; new data collected by the CFTC from banks and brokers in the United States indicated that index funds – largely blamed for the super-spike in energy prices – were actually reducing their positions as prices were rising in 2008.

Meanwhile, some funds like UNG, or the United States Natural Gas Fund, have started to trade non-U.S. gas contracts as an alternative to CFTC position limit curbs. Other index funds have followed.

In the end, if other international commodity exchanges don't enact similar laws then the United States will lose more contract volume to the competition. This is a bad law.

Just who are the regulators targeting with the new energy position limits? I imagine the system is rigged to benefit the big boys (oil companies) while reducing the influence of passive index funds and other sources of traditional asset management, including individual investors. Gold and silver limits are probably next. If so, some of the biggest gold ETFs like GLD might be forced to reduce its gold holdings to appease regulators. This makes holding physical gold (coins, wafers, bars) the ultimate strategy for gold-bugs since the CFTC can't ban public ownership.

But what the CFTC can't do, Congress can. In 1933, Americans saw their gold confiscated at $20.67 an ounce. Almost immediately thereafter, the government revalued the gold price to $35 an ounce and booking a neat 69% profit in the process.

If history doesn't always repeat, it usually comes pretty close. Some sort of gold ban is likely – however difficult it might be to impose considering the mass ownership of physical gold in 2010 and the gradual decay of the dollar since 1971. The next financial crisis, probably debt or currency-driven (or both) might trigger a repeat of FDRs 1933 executive order banning most physical gold.

This remains an ideal time to store some gold overseas at a private bank or with some close friends outside of your home domicile. The longer the dollar continues to decline accompanied by uncontrollable deficits, the greater the prospect of some sort of gold confiscation. I'm also convinced that some sort of new world currency unit lies ahead; gold won't fully back this new regime but should nevertheless play an important role determining its value. China will play a vital role.

By 2020, the interest alone on total U.S. deficits is estimated to hit about $900 billion dollars, according to Canada's National Post. I reckon from now until then gold will top north of $2,500 an ounce coupled with a massive currency crisis not only in the United States but worldwide, as the public grows increasingly distrustful of paper money and the avalanche of deficits backing each bill in circulation.