Below's Why the Gold and Silver Futures Sector Is sort of a Rigged On line casino...

A respectable number of Americans hold investments in gold and silver in one form or any other. Some hold physical bullion, while some opt for indirect ownership via ETFs or other instruments. A very small minority speculate through futures markets. But we frequently set of the futures markets – why exactly is?
Because which is where costs are set. The mint certificates, the ETFs, and also the coins in the investor's safe – them all – are valued, at the very least in large part, in line with the most recent trade in the nearest delivery month on the futures exchange such as the COMEX. These “spot” price is the ones scrolling across the bottom of one's CNBC screen.
That makes the futures markets a small tail wagging a much larger dog.
Too bad. A more corruptible and lopsided mechanism for price discovery never been devised. The price reported on TV has less to do with physical supply and demand fundamentals and more regarding lining the pockets with the bullion banks, including JPMorgan Chase.
Craig Hemke of TFMetalsReport.com explained inside a recent post what sort of bullion banks fleece futures traders. He contrasted purchasing a futures contract with something more investors is often more familiar with – buying a stock. The variety of shares is limited. When an angel investor buys shares in Coca-Cola company, they must be paired with another investor online resources actual shares and would like to sell in the prevailing price. That's easy price discovery.
Not so in the futures market including the COMEX. If an investor buys contracts for gold, they will not be followed by anyone delivering the actual gold. They are combined with someone who desires to sell contracts, regardless of whether he has any physical gold. These paper contracts are tethered to physical gold inside a bullion bank's vault from the thinnest of threads. Recently a policy ratio – the number of ounces represented in writing contracts relative to your stock of registered gold bars – rose above 500 to at least one.

The party selling that paper could be another trader with the existing contract. Or, as has been happening more of late, it might be the bullion bank itself. They might just print up a fresh contract for you. Yes, they could actually do that! And as many since they like. All without putting a single additional ounce of actual metal aside to supply.
Gold and silver are thought precious metals since they're scarce and beautiful. But those features are barely one factor in setting the COMEX “spot” price. In that market, and other futures exchanges, derivatives are traded instead. They neither glisten nor shine in addition to their supply is virtually unlimited. Quite click here simply, that's a problem.
But it gets worse. As said above, in the event you bet for the price of gold by either buying or selling a futures contract, the bookie could be a bullion banker. He's now betting against you with the institutional advantage; he completely controls the supply of your contract.
It's remarkable a lot of traders remain willing to gamble despite all with the recent evidence that this fix is within. Open fascination with silver futures just hit a fresh all-time record, and gold is just not far behind. This despite a barrage of news about bankers rigging markets and cheating clients.
Someday we'll have more honest price discovery in metals. It will happen when individuals figure out the sport and either abandon the rigged casino altogether or require limited and reasonable coverage ratios. The new Shanghai Gold Exchange which deals within the physical metal itself is often a step in that direction. In the meantime, stick to physical bullion and understand “spot” prices for the purpose they are.

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