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Seeking Alpha/Equity Management Academy
“I am surprised by the overwhelming bear camp that appears to still be in the gold market. You have to understand the difference between the physical and paper markets. The two are separate. The paper market is the futures market and is based on contracts for 100 ounces of gold, supposedly. If you want to buy physical gold, you can use the futures market to enter a position, lock in a price, put down the deposit and get it delivered when the contract expires. That has been the normal delivery process for physical gold in using the futures markets to exercise for delivery.:”
“The physical gold market, however, has now completely separated itself from the paper market. There are a large number of open interest positions in gold, which are looking to take delivery of physical gold through the futures market. COMEX is in a jam because the number looking to take delivery are at record numbers, so they are scrambling to find the gold to meet their obligations. The rumor is out there, you can Google it, that the COMEX potentially could default on some of these gold futures contracts if they can’t find enough gold or can’t negotiate cash settlements. The problem is that everyone in the world wants to buy physical gold.”
USAGOLD note: A reminder of the problem at the commodities exchange that could become top of the list again in June when contract owners begin to make known their intentions on delivery. Ordinary investors wishing to avoid the pricing and premium chaos that accompanied the same event in April might want to consider solidifying their own delivery intentions before the problem is once again headline material. If you would like to learn more about the potential problems, we invite you to call our Order Desk to discuss the situation. 1-800-869-5115 x100.
Repost from 5-5-2020