Redeemable ETFs

[AuAussie]

Some interesting new ETF products coming out, for example http://www.reuters.com/article/2013/04/09/gold-etf-merk-idUSL2N0CW20P20130409

Allows you to redeem your investments and take delivery - without having to have millions of dollars.

Which brings me to a hypothetical question:

It's pretty clear there is lots of manipulation and price suppression in the "usual" ETF markets, with lots of allegations that the physical gold doesn't even all exist anymore. What would it take to create a separate market and decouple physical metals from paper metals?

You look at all the silver coins selling out at all the mints, and have to wonder what happened to good old supply and demand? There is clearly a demand - but no, we have to sell at "spot", when spot so very obviously not relevant to the true "real-world" market.

 

[Phiber]

You look at all the silver coins selling out at all the mints, and have to wonder what happened to good old supply and demand? There is clearly a demand - but no, we have to sell at "spot", when spot so very obviously not relevant to the true "real-world" market.

Maybe you could try to sell your physical above spot (not including premiums) and see how you go
I predict you won't find any takers right now.

In a mania, you probably would.

 

[AuAussie]

Maybe you could try to sell your physical above spot (not including premiums) and see how you go
I predict you won't find any takers right now.

In a mania, you probably would.

I'm not selling any at the moment. I was just kind of wondering why everyone always complain that the paper metals are rigged and the price is fixed, but still use it as the be-all and end-all of what their metal is worth?

 

[Phiber]

Well, I think people are not desperate enough for physical right now.
Especially institutional investors who have heaps on money in Silver, they are not keen on taking delivery as one would need some massive secure storage and it would make it a lot harder to sell in a flash.

 

[AuAussie]

Well, I think people are not desperate enough for physical right now.
Especially institutional investors who have heaps on money in Silver, they are not keen on taking delivery as one would need some massive secure storage and it would make it a lot harder to sell in a flash.

That's my whole point. No-one here are institutional investors. So why bother with what they think gold and silver is worth in the volumes they trade?

There should be a whole different market for let's say $100K or less volumes. You can fit that in a suit-case, so delivery is not a problem. And given how much demand there's been lately at the mints such a market should have more than enough liquidity for "retail/recreational investors".

Look I know how these things work - I've worked for a large market maker myself in the past. But I'm throwing this out there as a thought experiment - because rationally none of this makes sense.

If it was truly a free market and I was running the US mint - as my stocks of Eagles start getting low, I'll just incrementally keep upping the price until people stop buying, then drop it back down. That way I make heaps more money. Why would you just sell out at the low spot price and then close the doors for a while when people are literally knocking your doors down?