It is not the Gold trading price that is different from physical Gold vs. paper, per se, it is a delivery obligation. Once Gold crashed from July 10 thru 19, pulling metal market prices right down to a low of $1311.65 per one ounce from Gold trading levels of $1560 just seen over a week ago, holders and cases of actual physical Gold saw the valuation of their holdings diminish in the process.
Then again, we have seen plenty of claims that somewhat there is a distinction between the market for actual physical Gold (individuals purchasing Gold bars or perhaps Gold coins) and that for "Paper" Gold metal (which represents Gold futures contracts traded on the COMEX exchange, shares of GLD 'Gold', or the Gold Exchange Traded Funds 'ETF').
The disconnect concerning both markets as evidenced by the crash on July 10-19 isn't indeed one of price, though relating to behavior, about an individual's reactions to market developments.
In the Gold trading market, this is an old classic "weak hands vs. strong hands" form a contrast to compare actual physical Gold customers along with paper Gold purchasers.
In fact, the "weak hands" within the Gold marketplace have been the over-leveraged bidders of Gold futures along with Exchange Traded Funds which triggered prices to plunge in the latest sell-off.
Then again, if one is an un-levered purchaser of Gold bullion - let's say, 10% of one's investable assets - you sort of observed the news headlines and watched the Gold ticker as metal crashed on all those days without having to have an effect on you.
Currently, Gold ownership is divided in between "weak hands and strong hands." The strong hands are China, Russia, India, and a few of the various other central banks, along with anyone else who's purchasing Gold for hard cash in physical state, with no leverage.
The weak hands happen to be retail traders and investors getting into shares of GLD , at the top level, employing margins, and futures gamers, and individuals who do not have an understanding of the Gold trading market. There are many trend enthusiasts to be found who started merely the following Gold using a trend basis although did not have an understanding about a Gold market or the way it works.
Believe or not hedge funds became to be weak hands, rather than strong hands. The reason being they have got redemptions to deal with. Hedge funds do not have everlasting investment capital. They might have monthly redemptions, or quarterly limit redemptions, or perhaps one-year lockups, or whatever it is, but indeed it is not permanent investment capital.
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