Paper Gold

Posted: November 11, 2014 in Paper money
Tags: , ,

paper gold

Like many, I have long suspected issues with the way any commodity is priced by the ‘Market’

What is more, I have also been sceptical about the size of the physical market verses the derivative or ‘paper’ market…it seems the basic problems with paper money are alive and well with many commodities too.

Consider this quote from the linked article;

“Because the derivative market is so large, paper gold makes physical gold’s market price.

This is a problem for nervous central banks because when prices are perverted in this way, it causes anomalies in the market.

The big one right now is how the gold price seems to be completely out of kilter with underlying demand.

For example, how on earth can China and others be importing such massive amounts of physical gold – and yet the gold price refuses to budge?

All sorts of theories have been posited. One is that major Western central banks have been providing physical supply to balance the books, by leasing gold into the market.

But here’s the rub: this gold may belong to other nations, which is causing anxiety for countries that rely on the Western depositories to store their gold”

This article by Money Week sheds some much needed light on this subject and also explains how some of the fundamanetal trading of gold is not currently being reflected in the price.

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