The Oil Futures Crash Is A Warning To Gold Speculators

For example, while the silver spot price closed at $15.36 on Thursday, Silver Eagles were selling for $27 or more at Money Metals’ higher-priced competitors.

Certainly, a few of these dealers are getting greedy or struggling with insufficient capital, but the elevated premiums, in general, DO reflect extraordinarily strong retail demand on the one hand – and on the other, higher sourcing costs and U.S. Mint closures that threaten to crimp supply.

Coin values cannot be manipulated arbitrarily on a futures exchange. No physical bullion product will suddenly acquire a negative price because a handful of traders desperately need to unload contracts at a particular time and can’t find buyers.

As long as you aren’t using leverage, your downside risk in bullion is limited. That’s certainly not the case if you choose to play gold and silver futures. There, as you heard the head of the CME/COMEX admit, you could potentially lose more than 100% of the capital you deploy.

The upshot for holders of physical is that in the event the highly leveraged precious metals futures markets lose credibility, and especially if they meltdown and default on obligations to deliver, a squeeze on available inventories of physical metal could push bullion prices explosively higher – regardless of what the paper quotes for gold and silver happen to be.

1 2 3
View single page >> |
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.
Dick Kaplan 5 months ago Member's comment

Not related at all. Demand for #gold is going up while demand for #oil plummets.

Sheryl Morris 5 months ago Member's comment

I would think so, yes.