Re: Where to sell?
Posted: 17 Nov 2011, 09:18
Even worse.
Talked to a dealer recently who told me that at his business size (10 million Euro annual revenue) he does not hedge his stock at all. He just can't afford. Thus, when the market goes down due to paper influences he keeps selling at a loss just financing his business activities from cash flow. Remember the statement "as long as the money is turned I'll be ok" thus, if the velocity stops most unhedged dealers will be screwed...
Further what we can expect at this market conditions is that the spot price will further decouple from reality.
Imagine you are a dealer having bought gold at 1700$/oz. Overnight the price falls to 1300$/oz. Would you sell? No. None of the unhedged (majority) dealers will. Thus making the paper market a joke. The September 2011 silver market was a good example for this. Yes, there was a low spot price but you could not buy at these rates.
Talked to a dealer recently who told me that at his business size (10 million Euro annual revenue) he does not hedge his stock at all. He just can't afford. Thus, when the market goes down due to paper influences he keeps selling at a loss just financing his business activities from cash flow. Remember the statement "as long as the money is turned I'll be ok" thus, if the velocity stops most unhedged dealers will be screwed...
Further what we can expect at this market conditions is that the spot price will further decouple from reality.
Imagine you are a dealer having bought gold at 1700$/oz. Overnight the price falls to 1300$/oz. Would you sell? No. None of the unhedged (majority) dealers will. Thus making the paper market a joke. The September 2011 silver market was a good example for this. Yes, there was a low spot price but you could not buy at these rates.