Jesse's Café Américain Wed 2010-04-07 19:14 EDT
The Case for Position Limits: What is the 'Spot Price' of Gold and Silver And How Is It Set?
...almost all retail transactions for physical bullion in the US key off a 'spot price' that is derived from a paper market which is not based in the reality of physical supply, since the futures exchanges explicitly allow for the settlement in cash if physical bullion is not available. In fact, the vast majority of transactions are settled in cash, and are little more than derivatives bets it seems, and often hedges related to other things like another commodity or interest rates...As someone who approaches it as an amateur economist, and has been looking at its dynamics for the past few years, I may be missing something, but this seems less like an efficient market mechanism for price discovery and capital allocation, and more like a carney game.
Case; gold; Jesse's Café Américain; position limit; set; Silver; Spot Prices.