Precious metals shenanigans- ETFs to be delivered for futures

August 13th, 2009

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One question we often ask ourselves is: how much are the prices for gold and silver manipulated? Remember, back in Possible fuses that can ignite silver prices: price manipulation, we wrote that,

The problem is, the paper silver that is being sold through the futures market is unlikely to exist. Why? Commodities traders on COMEX have made bets in which they promise to deliver more than twice the amount of silver known to exists!

As the prices in the futures market affects the prices in the spot market, any manipulation in the futures market will indirectly manipulate the prices in the spot market.

Also, a lot of ‘gold’ and ‘silver’ are traded in the form of ETFs. At Possible fuses that can ignite silver prices: ETFs, we asked,

A very big question to ask is this: how much of the ETFs are backed by the physical precious metals?

Since ETFs accounts for a significant fraction of demand for precious metals, how much of these demand translate into actual demand for the physical precious metals?

Then, there’s another piece of shenanigan. As this article from the Gold Anti-Trust Action Committee (GATA) alerted us to this document from the US Commodities Futures Trading Commission (CFTC),

The New York Mercantile Exchange, Inc. (“NYMEX” or the “Exchange”) hereby notifies the Commodity Futures Trading Commission (“CFTC”) that, as set forth in the attached rule interpretation, it will accept gold-backed ETF shares as the physical commodity component for EFP transactions involving COMEX gold futures contracts, provided that all elements of a bona fide EFP pursuant to Exchange Rule 104.36 are satisfied.

In other words, gold ETFs can be delivered in lieu of the physical gold commodity as part of the obligations of the futures contract!

Humanity has finally invented alchemy!

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