Listed here's Why the Gold and Silver Futures Market place Is sort of a Rigged Casino...

A respectable amount of Americans hold investments in silver and gold in one form or some other. Some hold physical bullion, while some opt for indirect ownership via ETFs and other instruments. A very small minority speculate through futures markets. But we frequently report on the futures markets – why exactly is?
Because which is where prices are set. The mint certificates, the ETFs, along with the coins within an investor's safe – all of them – are valued, no less than in large part, based on the most recent trade inside the nearest delivery month on the futures exchange for example the COMEX. These “spot” costs are the ones scrolling through the bottom of your CNBC screen.
That helps to make the futures markets a little tail wagging a much larger dog.
Too bad. A more corruptible and lopsided mechanism for price discovery has not been devised. The price reported on TV has less about physical supply and demand fundamentals and more related to lining the pockets in the bullion banks, including JPMorgan Chase.
Craig Hemke of TFMetalsReport.com explained in the recent post how a bullion banks fleece futures traders. He contrasted purchasing a futures contract with something more investors is often more familiar with – purchasing a stock. The variety of shares is limited. When an angel investor buys shares in Coca-Cola company, they will be paired with another investor the master of actual shares and desires to sell with the prevailing price. That's easy price discovery.
Not so in the futures market such as the COMEX. If a trader buys contracts for gold, they don't be followed by anyone delivering the particular gold. They are associated with someone who would like to sell contracts, regardless of whether he has any physical gold. These paper contracts are tethered to physical gold in a very bullion bank's vault with the thinnest of threads. Recently the protection ratio – the amount of ounces represented on paper contracts relative to the particular stock of registered gold bars – rose above 500 to a single.

The party selling that paper could possibly be another trader with an existing contract. Or, as has been happening really late, it could be the bullion bank itself. They might just print up a new contract for you. Yes, they can actually do that! And as many as they like. All without placing a single additional ounce of actual metal aside to supply.
Gold and silver are believed precious metals as they are scarce and exquisite. But those features are barely an aspect in setting the COMEX “spot” price. In that market, and other futures exchanges, derivatives are traded more info instead. They neither glisten nor shine as well as their supply is virtually unlimited. Quite simply, this is a problem.
But it gets worse. As said above, should you bet around the price of gold by either selling or buying a futures contract, the bookie could just be a bullion banker. He's now betting against you having an institutional advantage; he completely controls the supply of one's contract.
It's remarkable numerous traders remain willing to gamble despite all from the recent evidence the fix is within. Open desire for silver futures just hit a whole new 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 people figure out the sport and either abandon the rigged casino altogether or refer to 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, keep with physical bullion and understand “spot” prices for which they are.

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