12 September 2013

Gold Chart Intraday - Is the COMEX Still 'The Market' For Anything Except Paper?

There is some talk that JPM has 'cornered' the gold market on the COMEX.

This is based on COMEX released data.

I don't know. That might be technically correct, but it overlooks one important fact.

The 'COMEX' is no longer the 'gold market' or the 'silver market.'

Given that the COMEX could supply the gold markets around the world for about two months before rolling over and shutting down, I think it more of a conceptual market than THE market.

Like some outworn custom, people still pay attention to the paper prices on the COMEX out of force of habit. But the locus of buying and selling of the actual product has been moving elsewhere for some time now. 

The LBMA can make a better claim to the title of 'the market' for precious metals, but even that is slipping away.  It is just harder to see because the association is so opaque with regard to its statistics on sales and inventories.   

But I think this current arrangement is more historical than practical, given the weakness of the regulatory climate in the US and the UK.   Is there any price discovery and market clearing going on in New York, or it is just some big game of Liar's Poker with a vestigial connection to reality?

What good are a set of nice statistics when what they represent is a pretty facade over a hollowed shell?  And given the lack of position limits and basic limitations on price manipulation without consequences in physical delivery it is unfortunately taking on the character of a control fraud.

Given all the scandals that have been surfacing since the market rigging of real goods and services by Enron I don't think that is such an unreasonable point of view.  These jokers are off the hook, and out of control.

If the NYC and London punters keep this up, the price of the metals will diverge from the COMEX paper prices, like the currency markets in the eastern bloc and Russia widely diverged from official exchange rates in the 1990's. 

But, they never listen.  Once confidence is broken, it is very hard to regain.  Even in a culture that holds that there should be no consequences for extra legal actions by wealthy and powerful insiders.