[djf]

What happens is this:

People who own/trade metals deposit it at the COMEX.

Some people come along and decide that they want to buy “futures”.

Futures means you write a contract with someone to buy something in the future at a fixed price.

Now if the price of the stuff goes down, then the guy who bought the futures contract is SOL. If the price goes up, he can either settle the contract for some extra money or demand delivery of the metals/commodities.

Now it is not unusual for the people who have metals on deposit to write more contracts for futures than they actually have physical metal to sell.

If that happens, and the price goes up large enough, there is a possibility that there might be more demands for delivery than they actually have.

It’s like say I have six eggs but I write a contract to you that Jan 1 I will deliver to you twelve eggs.

Then on Jan 1 you want your eggs.

I give you six and you say wheres my other six and I am forced to go out and try to find 6 more eggs to give you.

But if nobody wants to sell me any eggs, the price could go astronomical.

I’m not a trader and understand things probably only a bit more than you, but I think that’s the gist of it.

[Leonard210]

Thanks for the quick reply djf. The eggs analogy helped. It gets even more dicey for me as additional methods get added into the mix, as the post by rellimpank demonstrates.

For the little guy, is the answer to by some gold to protect your cash or to wait? For those of us who don’t trade in the stuff, the complexity of trading and its language obscures the bottom line.