13 June 2012

COMEX is not the be all and end all

Have been involved in a bit of a non-debate (as in the other side doesn't want to explain their position) on whether traders can just rely on data from COMEX. My answer is no, as the COMEX precious metal markets are but one part of the total market for paper and physical metal and through arbitrage are tightly linked to each other. Therefore just relying on COMEX open interest, volume, etc data will give one an incomplete view and thus trading methods based only on COMEX analysis will produce a lot of "surprise" events/patterns.

I covered this point in this post on short term trading. To observe me banging my head against a brick wall, and for a further exposition of this view, read the comments posted at Scott Pluschau's blog.


  1. You banged your head against the wall???

    I think the other guy did.


  2. Wow, Bron!

    I have to hand it to you for trying - I don't know how you would have made it clearer. And yet, the blind will not see...

    I especially "like" the last comment back to you where he hopes the Mint will change its "hedging" techniques! If that does not show complete and utter ignorance of how elegantly you are using other people's money to hold your inventory, I don't know what will.

    I really appreciate your posts and your blog. Learned a lot about the real gold market from it.


  3. Scott, I'll let my readers be the judge of who's heads on which wall.

    "Because whatever is happening outside the COMEX will be reflected in the futures markets."

    So you agree that arbitrage means COMEX price reflects OTC prices and vice versa. The problem is that the way arbitrage works is that COMEX only reflects the NET "happenings" or volume from outside and not the gross and as your method uses volume figures, if you are only looking at net figures, not gross you don't have the full picture.

    "Perhaps the Mint will one day consider a different approach to their "Hedging" methods."

    More wall banging. Our approach to "hedging", if you can call it that, has zero risk therefore we don't need to consider a different approach.

    Read this http://goldchat.blogspot.com.au/2008/06/gold-value-chain-part-iii-manufacturing.html for an explanation. You're living in the Buy and Hedge world when there is a Leasing alternative.

  4. The real world vs gambling.

    I believe the stock traders gamble on the volatility of the charts than what the real physical world is portraying. Like milking a cow, the cash feeds the cow, and the traders milk the cow, the more volatile the more milk they make and the more money they make. They do not care what the real world is, they make money through speculation using charts and the psychological moods of the people.

    If all hell breaks loose, be assured their bank vault is empty. No gold for you from Comex.

  5. This is a little off the subject but has anyone on this site purchased physical from JM Bullion. Looking to buy some but strangely there are no independednt online reviews of this company. They all seem to be self sponsored. Strange...