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Means of Gold Intervention III: Intervention through the Futures Market

In: The Gold Cartel

Author

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  • Dimitri Speck

Abstract

Physical demand can ultimately only be satisfied with physical material. One fashions a wedding ring from real gold, not from futures and options. Real demand must be served in a real manner, in the event that the material is demanded in physical form. Nevertheless, one hears now and then that the demand for gold can be satisfied with derivatives or ‘paper gold’. In the case of investment gold, it is occasionally, indeed, possible that the gold is not bought physically. If an investor buys an ounce via one of the many legal constructs established today – certificates, exchange traded funds (ETFs) or gold accounts, to name just three – the question whether the gold was physically bought and stored always arises. This is so because it is possible that the investor merely has a claim to an ounce and that, overall, fewer ounces were bought than claims were issued (fractional reserves). It can even be the case that he has only bought the right to participate in the price change per ounce.

Suggested Citation

  • Dimitri Speck, 2013. "Means of Gold Intervention III: Intervention through the Futures Market," Palgrave Macmillan Books, in: The Gold Cartel, chapter 0, pages 76-81, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-28643-7_17
    DOI: 10.1057/9781137286437_17
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