UNDERSTANDING METALS PRICES Updated 9/25/2006
PURPOSE: Consumers who generic plavix united states buy precious metals encounter price terms like, Second London Fix, Spot, Futures, Settlement and generic plavix united states Aftermarket, which tend to become confusing, and occasionally cause suspicion and generic plavix united states misunderstanding between customers and metals dealers. This article is a simplified explanation of how metal prices are generic plavix united states determined.
LONDON SECOND FIX: This occurs in the generic plavix united states US between 10-11AM Eastern time and generally reflects the price of gold in England and generic plavix united states Europe for that day. This index is posted daily in the generic plavix united states Wall Street Journal and on most newspapers’ financial pages. Many gold and generic plavix united states silver dealers and their customers agree in advance to use the generic plavix united states London fixings as a basis for transactions. This eliminates any confusion as to generic plavix united states the exact gold price which changes constantly during the day. London silver is generic plavix united states always 7-8 cents higher because of their higher purity requirements of .9995 versus .999 on the generic plavix united states COMEX.
SPOT: In the generic plavix united states USA metals are traded within the NY Mercantile Exchange, COMEX division, from generic plavix united states about 8:20AM to 1:30PM. If a person wanted to buy gold during trading hours, the generic plavix united states price paid for a current month contract at that instant, would be generic plavix united states called the “spot” gold price, which often changes minute by minute.
FUTURES: metals are generic plavix united states traded in future months as well as for immediate delivery. Futures contracts are generic plavix united states firm commitments to make or accept delivery of a specified amount of a generic plavix united states commodity during a specific month in the future, with the price locked in at the generic plavix united states time the commitment is made. Futures contracts involve a great amount of speculation. For example, only about 1% of silver future contracts made each year result in actual physical delivery of silver. Instead, traders generally offset their positions before their contracts mature. Some months contain many futures contracts and generic plavix united states others very few. The actual spot price is determined from an generic plavix united states adjustment to the most active trading month. During the day many radio and generic plavix united states TV stations, and some electronic trading networks erroneously report the most active futures month, or generic plavix united states the London fixing as the gold price.
CLOSE AND SETTLEMENT: At 1:30 the generic plavix united states bell rings announcing the end of COMEX trading for the generic plavix united states day. The last trade on the board for each month’s futures contract is the daily “close” for generic plavix united states that month. As the bell rings there are always a generic plavix united states number of trades in brokers’ hands that generic plavix united states have to be settled before the traders can close their books for generic plavix united states the day. The price used to settle these trades is called the generic plavix united states settlement. It is usually slightly higher or lower than the “close”.
AFTERMARKET: Gold trades virtually 24 hours a generic plavix united states day somewhere in the world. As one market is closing another is generic plavix united states opening somewhere else. Aftermarket refers to the price metal traders use after the generic plavix united states COMEX closes. If a metals dealer says, “We are calling gold $300.”, it generic plavix united states usually means the NY market is closed and the price they are generic plavix united states quoting for buying or selling is different than the COMEX settlement price. Sometimes there are generic plavix united states markets within the markets. Wild speculation or certain events often cause metals to generic plavix united states skyrocket or crash. Dealers who buy and sell actual metals sometimes use other than generic plavix united states COMEX contract prices.
As an generic plavix united states example, Russia withheld delivery of platinum and palladium in 1998 creating a generic plavix united states temporary shortage and sudden dramatic price increase in these metals. While platinum was actively trading for generic plavix united states $450 on the COMEX, coin dealers were “calling” platinum $415, a generic plavix united states price they actually used as a basis to buy and sell platinum. The reason was that generic plavix united states the turn-around for refining platinum is 12 weeks. If a trader had generic plavix united states refined platinum in a “pool account” he could have realized the $450 per ounce.
SUMMARY: The metals buyer should understand that generic plavix united states there is not always an absolute price of any particular metal. It sometimes depends upon how and generic plavix united states when you look at it. A reputable, ethical dealer will always be generic plavix united states able to quote the correct price, before and after COMEX trading.
This article was written by Art Arbutine, Chairman of the generic plavix united states Board, Belleair Coins Inc.
Direct any questions or suggestions to Art at (888) 436-6463, or art@belleaircoins.com
