Deciphering the Complex World of Precious Metal Derivatives: UCITS and the Shift from Physical to Paper Gold & Silver
Why and How Does the Physical Gold and Silver Market Continue to Be Engulfed by the Enormous World of Paper Gold and Silver Derivatives?
This disparity has persisted for decades. Why is there such a significant outflow of ounces from SLV and GLD, yet the price has barely been impacted?
And why has there been a notable increase in derivatives on precious metals in recent years, as reported by the OCC?
To quote Bob Dylan, "The answer, my friend, is blowin' in the wind." This article will not focus on the Comex but rather on a lesser-known investment scheme that attracts vast sums of money, in the trillions of dollars, diverting it away from physical assets such as gold and silver.
A recent article titled, "BlackRock warns investor disdain for mining threatens green transition" highlights that the world's largest asset manager criticizes complacency over the supply of transition metals.
Understanding the regulatory environment and the flow of money, which disincentivizes owning actual physical assets, will shed light on what this article overlooks.
After diving into the following details, one might wonder: Why not invest directly in real assets, having legal ownership that is straightforward? Possibly, the vast amount of money created over the past 50 years would have driven commodities like gold and silver prices through the roof a long time ago. The derivatives market acts as a buffer, ensuring large capital investments have a minimal impact on the underlying commodities.