The gold fix is a good guide to the value of gold at one moment in time, and is designed to allow gold traders to trade gold at a fair price.
And, if you are a gold trader with enough money to be involved at the level of the gold fix, it can be efficient: Since there’s such a large pool of liquidity available at one time, as long as there is not excessively large demand or supply, the price should be fair.
* Second, the cost of entering the market is high through the gold fix: Since physical delivery and storage of the gold has to be arranged, and can be costly, there is very little enthusiasm anywhere for small quantities, and the smallest trade size is somewhere around $500,000. Although a gold trader may be able to find an intermediary that will take a smaller order and aggregate it up with other orders from gold traders, the intermediary will likely charge you a fee for doing so, which can reduce your profits.
* More important, perhaps, is that there may be a conflict of interest in the gold fix. Let’s say you’re a gold trader and you want to buy gold, so you go to one of the LBMA members, a producer, involved in the gold fix. This member must acts in two roles: He must get a bargain price for your gold trade, but he also must get a high selling price for himself. And this is happening a lot, with many gold traders and dealers. Think about what happens if most customers are buyers, and a producer on the LBMA knows this it. It would benefit him not to declare as a seller until the price quoted by the chair has gone up a bit.
Story by http://retwt.me/ce6p
Tags: Gold / OiL
