Monday, December 7, 2015

James Turk – Oil Plunges 6 Percent To New Lows But What About Gold And Silver?

...the precious metals continue to trade within a 2-tiered market. The two markets are interrelated because they intersect at the spot price of gold, but they are fundamentally different.
One tier is the physical market, and the second tier is of course the paper market. In the former, people own physical gold. In contrast, in the paper market, people only own exposure to the gold price. They don’t own gold.
When you own a futures contract, option or gold ETF, you don’t own physical gold. Similarly if you own a forward contract for which someone like a bullion bank is obligated to deliver metal to you at some future date, you own paper-gold. All paper-gold comes with is counterparty risk, which changes gold from a safe-haven to just another financial instrument.

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