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First you have to fly the gold to Switzerland to a refiner and melt the London 400oz bars into COMEX 100oz bars. New bars get new stamps, serial numbers, etc.
by mrcode007 2y ago
First you have to fly the gold to Switzerland to a refiner and melt the London 400oz bars into COMEX 100oz bars.
New bars get new stamps, serial numbers, etc. It’s a spot where illegal gold can (doesn’t have to) be introduced.
Once you melted London 400oz bars into COMEX 100oz bars, then you fly them to New York.
This process in itself can inflate the COMEX price by the cost of delivery which is folded back into the forward price. When dealing with futures contracts it is important to know that the price is almost always localized based on the cost of delivery. There isn’t one unique global price of gold.
- mikhailfranco 2y agoI believe COMEX changed their delivery standards 5 years ago to include LBMA 400oz bars, using a mechanism called 'ACE': https://www.cmegroup.com/trading/metals/precious/faq-gold-enhanced-delivery-futures.html#how-does https://www.cmegroup.com/trading/metals/precious/faq-gold-en... Every wriggle of the weasel needs a good 3-letter acronym. Perhaps they knew what might happen :)
- mrcode007 2y agoThanks for pointing it out :) Pretty interesting. I guess the trip is now a bit shorter!
- imtringued 2y agoWhen I see comments like this I'm wondering why everyone including economists and Marxists is under the delusion that gold is this universal commodity whose physical properties make it money, when in reality the entire point of money is to minimize transaction costs, not create them!