Question about PM spot price

[Katmandu]

Does anyone know how that spot price of PMs actually gets set on a minute by minute basis?

Some say that the banksters have full control of the price and fully manipulate the price to their whims.

Others say that they banksters have some control over the price, but not full control.

If they do not have full control, then how does the spot price get set continually around the clock?

[k-os]

Supply and demand. Asking price and bidding price on paper metals (SLV/GLD?).

I don't know exactly what control the banksters have, but if the spot price is semi-legitimate, the elite can still control it by dumping at a lower price.

I am sure someone will correct me if I am wrong.

[Katmandu]

Supply and demand. Asking price and bidding price on paper metals (SLV/GLD?).

I don't know exactly what control the banksters have, but if the spot price is semi-legitimate, the elite can still control it by dumping at a lower price.

I am sure someone will correct me if I am wrong.

OK, I am with you so far. But I am looking to drill down still further. If asking price and bid price of paper silver/gold (COMEX?) set the spot price, then how does this happen? Do they take all asks and bids for that moment in time, average them together, and then have a computer spit out the spot price on a continual basis?

And when several metals markets overlap (London, Hong Kong, NY Globex for example) does the spot data from their computer systems get averaged and output as the spot price?

Where does Kitco get their spot price data feed from?





And how did the spot price get set before the COMEX existed?

[TomD]

I think it would be tough to game or directly control the price, manipulation is another subject. Below is the Kitco feed on silver, notice all the different markets in various parts of the world. What we call spot is the consensus of all those markets and the agreed on value of silver among 10's of thousands of buyers and sellers. Silver is a relatively small market, small enough for a single big player to distort the market by the use of short sales or other actions. I forget the specifics but until Comex increased margin requirements, a short seller could control MANY 5000 oz contracts with a small cash outlay. All you had to do was massively short silver, drive the prices down and cover your short position. Instant money by the ton!

But, by direct control, just dictate the price of silver? Don't think so.

http://i185.photobucket.com/albums/x229/TomD77/post%20from/silver.gif

[bl96S5eu]

Good question Katmandu and one I never knew the answer to so I did a little hunting:
How the Spot Price of Silver or Gold is Determined (http://about.ag/HowSpotIsFigured.htm)
How Current Gold and Silver Prices Are Determined (http://www.itmtrading.com/current_gold_prices.asp)
There are more but so far those were the best ones I've read.

[TomD]

OK, I am with you so far. But I am looking to drill down still further. If asking price and bid price of paper silver/gold (COMEX?) set the spot price, then how does this happen? Do they take all asks and bids for that moment in time, average them together, and then have a computer spit out the spot price on a continual basis?

And when several metals markets overlap (London, Hong Kong, NY Globex for example) does the spot data from their computer systems get averaged and output as the spot price?

Where does Kitco get their spot price data feed from?





And how did the spot price get set before the COMEX existed?

You're beyond my direct experience here but the markets are actual markets, in function the same as your local farmers market. Sellers put their product up and receive bids. Ever seen films of the madhouse that is (was) the Chicago Commodities Exchange? The guys on the floor were traders. Things are electronic now but the concept is the same. Not sure how Kitco synthesizes all the markets but there has to be some mechanism coordinating the markets.

[Katmandu]

Well, some questions answered, some deeper details still in limbo. I am guessing that there is probably an insider who has written a book or two about this. If anyone knows of any such books, please do post.....

[beefsteak]

Katmandu,

The definitive history of how prices are set is founded in what is known as the "open outcry system." This originated in Greece several centuries back, if I remember my former brokerage training texts accurately as to the geographic origin of commodity trading. Anyhow, during the day, the buyers and the sellers of commodities gathered on the steps of a local landmark such as the Parthenon, and basically shouted their needs to each other, price and commodity and size of bid or ask.

The open outcry was to reduce fraud and favoritism and side-deals, known to this day as "curb trades." And curb trades are still practiced to this day. Spread trades are done on the curbs for example. And so are Over the counter trades, and options, especially if one is trading "odd size lots" as opposed to the exchange required "normal contract sizes" of 5,000 bushels, wheat, corn, oats, etc, or 100 Kilo gold, or any other specified size. All deviations from contract norms are traded on "the curbs" which is saying, no party is officially & physically standing "in the pits" when they contract their odd size biz.

If you've ever studied the modern layout of the current commodity pits, you will notice they have maintained the descending series of steps into the center of the pit.

The pits are not perfectly round, but more octagonal in nature. Each "pie wedge division" represents a futures trading contract month, where the open outcry and hand-signals constantly take place. Yes, hand signals are still used to this day by those conducting business with other buyers and sellers regardless of whichever pie wedge step either party is standing upon.

In simplest terms, to sell, one's hand faces the group, and the number of fingers extending conveys the size of the sell being offered.

To buy, one's hand faces oneself, ditto the fingers etc. in a bring it to me type non-verbal body language motion. The price is still yelled out at the crowd of sellers who may be facing you or even standing next to you. It all must be audibly yelled!

There's more, but those are the basics.

If you want to see a modern cinematic film clip of the actual behavior I'm trying to describe, get ahold of the movie, Quicksilver, where Kevin Bacon was the lead. Here's the 2 minute trailer which shows SOME of the "in your face" open outcry trading modality I'm trying to describe.

http://www.youtube.com/watch?v=gPTu2F450sk

While the story line says Kevin Bacon was trading a stock to help out a friend fund his dream of owning his own street vendor hotdog cart so he could get out of the courier business, the action and the background ticker display on the actual trading floor, was a Chicago Commodities Trading Pit setting providing the live action movie set background. The "commodities trading pit" setting is very VERY different from the clustering around gigantic electronic screens at "stations" in the Equities' markets more visible on the CNBC type programming. No open outcry in the Equities.

Open Outcry is still the predominant norm, at least here stateside. Still happens in other venues as well, altho' a more recent trend has been to shift to electronic trading platforms there, as well. And latest greatest gee-whiz electronic modality is still facing considerable resistence by the professionals.

I've been to the pits, stood in them, sent orders to them, gotten fills from them, etc. I was never a "floor trader," as I couldn't stand the volume levels. And having a fondness for vocalization in my private life, made me very interested in keeping my singing voice in tip-top shape. All that yelling is very very hard on the vocal cords, not just the ears. It is all very VERY cacaphonus and very very deafening to put it mildly.
Visualize a very big football huddle, with everyone yelling simultaneously at the quarterback who is trying to outshout them all to call the next play, x about 300 or so, depending upon the commodity.

It's been a long time since I studied the required tests for licensing, and suspect it is all online now. Sorry I don't have an actual title and copyright date reference for you. Perhaps Amazon or Alibra?


beefsteak

[gunDriller]

i notice that the silver market often has downticks that never show up in the daily chart - they happen too fast.

but you have to have electronic access to the Kitco price feed to see them.

as far as i can tell, the APMex price on their home page is among the most up-to-date, though adjusted for their own spread.

the price feed here on G-S.us -
http://www.kitconet.com/images/sp_en_6.gif

is usually up to date but sometimes can get 'stuck' - it will stop updating, usually on extremely volatile days.

same for the Kitco 'live silver' and 'live gold' - they can get "stuck" or just become "service unavailable".


Provident has a price feed that seems to adjust about every 4 minutes. then they re-calculate their prices midway between that 4 minute period. so sometimes if the spot price ticks up, Provident will be sitting with the lower price, for about a minute (= buying opportunity).