Oh, really, major contracts in physical gold and silver are settled in physical transactions? Tons of gold and silver are passed back and forth between the major investment houses? They are not just winking and exchanging paper?
Well yeah, of course they are. There's a big warehouse somewhere, don't worry it's all secure, and there are pallet loads of gold and silver that get hauled in like pallets of stock at Costco. But they take care of it all, see, one day a pallet will have a sign on it that says "JP Morgan", the next day it will say "Vanguard".
See? It's all on the up-and-up.
Lot’s a vague noise in that response. Only suitable response: “Why yes, some people do some things some times maybe”.
Now if you want to discuss the specifics of actually what occurs when commodity futures contracts expire, the settlement process, see my original post.