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To: The Vet who wrote (19530)	11/7/2003 9:00:08 AM
From: sea_urchin	Respond to of 81861

Mr Vet > I am sure that we agree on these issues and we are both like the four blind men, simply describing different parts of the elephant! No, definitely, no. You are talking about purchases of gold or certificates representing a gold equivalent. I am talking about a derivative which is something else entirely. A derivative is a contract or undertaking to be able to buy or sell at a price and time, not an actual purchase or sale. Hence the term "Commitment of Traders". One trader undertakes to sell, the other undertakes to buy, and at a certain time, but no transaction has yet taken place when that undertaking is made. Nevertheless, these "undertakings" are traded as if they were the actual substance (gold) which will be bought or sold and it is the price of these "undertakings" on Comex which is reflected as the "gold price" even though no gold has actually been traded. Hence my analogy to the Cheshire cat. There is no cat, only a smile. There is no gold, only a price. The actual figures for these "undertakings" are here technicalindicators.com As you see, there are 259,000 open contracts or "undertakings" last week --- where no gold has actually changed hands. Each contract represents 100 oz gold --- but no gold has been traded --- only a promise to buy it or sell it, and indeed a promise that can and will be broken. Of concern is the fact that the industry is short 70% of the contracts and speculators are long 71%. This means that the speculators have not yet bought all that gold ie 259,000 X 100oz X 71%. All they have bought are the contracts that they may buy it at a future date and price. Clearly, and this is the point I am trying to make over and over, the derivative has taken the place of the metal. In the situation you describe, the "paper" represents the metal and the metal, itself, has actually been bought and has been taken off the market, even though it may not physically move around. Furthermore, 259,000 contracts is enormous by historic standards. COT "normally" runs at about 60,000 contracts. I must also mention that in the big bull market of the late 1970s, it was the purchase of actual gold, not derivatives, which made the run up to $850. That market was based on real gold, this one is based on promises.