So the COMEX is selling metals which they do not possess now? I thought the whole point is that COMEX coupons were backed by physical goods which you could actually cash out if you wanted?
Otherwise you are just betting on paper.
Otherwise you are just betting on paper.
The concern has always been a run on Comex if physical demand suddenly increases. In some ways that would be good, as the paper market is artificially keeping the price of gold down. If you don’t settle in gold you sell more contracts, and the supply is artificially inflated. In short term it will be awful for Comex, which does a very large amount of commodity futures.
I think this says there is 300x as much physical gold as there is gold on paper. Context and common sense indicate the opposite was intended.
You put $100 in a zero-balance account. You spend $10, deposit $20 and then spend another $30. Your ending balance is $80. The total value of transactions is $160. There is a 2:1 ratio of transactions to ending balance.
For technical reasons, when a commodities trader wants to exit or liquidate a position they typically do so by offsetting it. "To offset a position, a trader must take out an opposite and equal transaction to neutralize the trade. For example, a trader who is short two WTI Crude Oil contracts expiring in September will need to buy two WTI Crude Oil contracts expiring on the same date" [1].
If instead of a bank account the first example were gold contracts, the market would show $160 of gross contracts written netting out, in the end, to $80.
[1] https://www.cmegroup.com/education/courses/introduction-to-f...
Yes, paper promise. Sometimes promises can be kept, but not always.