Russia is about to launch a new market. This market will enable people to buy and sell gold, meaning physical gold, on an exchange. It is not going to be based on commodity futures.
Also included will be silver. In 2014, palladium and platinum will be added to the list of metals.
The Moscow stock exchange has agreed to transport these precious metals from production companies, as well as store them, and deliver them to the buyer the next day. Presumably, this is going to boost liquidity of the markets.
To make this work, people have got to trust the Russian markets. This will be a test of people’s confidence in contracts issued by a Russian commodities market. If this trust spreads, this market could become an important source of accurate information regarding supply and demand for physical gold, silver, platinum, and palladium. It will serve as a check on the pricing that is produced by competition in the futures market, where only about 2% to 3% of the contracts involve physical delivery.
It will take years for this market to become a serious contender against America’s commodity futures markets. Speculators like leverage, and the futures market provides this leverage. But it will be useful to have a developed market in which we can compare the price of the physical precious metals in relationship to the prices registered on the futures markets.