Hi Cedar!

I hesitantly wade in as I am not completely immersed as you are in the subject of Comex etc. Are we not speaking of a futures contract here? In the Ag buisness, wheat, canola etc futures contracts are traded all the time as a hedge against market moves to lock in prices of the commodity. If I like the price of wheat for next yr, I can buy a contract for that price, and then the market will reward me if the price goes down (my contract is worth more), but my wheat in the bin isn't, so they balance out, hence, I have hedged my risk and in the balance I get the price I locked in so long as I sell my contract when I sell my wheat. Only a tiny fraction of the contracts traded ever get acted on. For the unlucky stiff who can't balance his trade acct out for the 100 tonnes of wheat I lock in FOB Vancouver, he would have to take delivery of it there if I don't sell my contract to him, and I would have to arrange to get it there. Because of the inherent hassels, it ends up being a paper transaction... paper wheat, but we both get the desired effect of predictibility in prices. Is it not the same with gold? I think there is a chance if the end users of gold wanted delivery and it couldn't be delivered, there could be a tremendous vault in the price, but is this likely? I can see that it is easier for people to store anounce or a hundred of gold than a couple thousand tonnes of wheat but...

I think if everyone did demand delivery and the paper gold market collapsed, it would be a long term negative. The only sale of gold could become private sales, and the price of gold would be a vague rumour instead of an openly traded futures contract. Am I off base? I think if the true demand for gold is greater, the price of paper gold will reflect it, tho as always, our markets are imperfect and the elastic can snap hard both ways.

Cheers!

G'lane