WCP: The Gold-Backed Chinese Yuan For Oil and Death Of The Dollar

Spot gold is traded for settlement two business days following the trade date, with a business day defined as a day when both the New York and London markets are open for business. Unlike many commodity markets, the forward market for gold is driven by spot prices and interest rate differentials, similar to foreign exchange markets, rather than underlying supply and demand dynamics. This is because gold, like currencies, is borrowed and lent by central banks and in the interbank market. Interest rates for gold tend to be lower than US domestic interest rates. This encourages gold borrowings so that central banks can earn interest on their large gold holdings. Except in special circumstances the gold market tends to be in positive contango, i.e. the forward price of gold is higher than the spot price. Historically this has made it an attractive market for forward sales by gold producers and contributed to an active and relatively liquid derivatives market. [THERE’S A JOKE IN HERE. ILL TELL YOU DURING THE BROADCAST.]