Wednesday, December 7th, 2016 MST

Kitco precious metals prices changes notice

Kitco.com, which is renown among gold and silver investors for feeding to the Internet precious metals spot prices, recently posted this notice on its site:

Metal price changes are now based on closing prices at 5:15 PM NY time Mon-Fri.

The notice has caused some confusion on the part of many precious metals investors and deserves clarification of just what it means.

The header at the top of Kitco’s All Metals Quote page reads New York Spot Price, which suggests that the prices come from New York. They do not. The prices are fed from the Chicago-based Globex Exchange, which is an Internet trading platform. The Globex is owned by the Chicago Mercantile Exchange (CME), the world’s largest commodities futures exchange.

However, The New York-based COMEX is the best-known exchange among gold and silver investors because that is where gold and silver have traded for decades. When investors think New York Spot Prices for gold and silver, they automatically think that prices are coming from the COMEX. But, from Kitco’s site, gold and silver prices are coming from the Chicago-based Globex Exchange.

The 5:15 PM NY time adds to the confusion because gold and silver investors have long known that the New York market closes at 1:30 p.m. EST. (Actually, gold closes at 1:30 p.m., EST, and silver at 1:25 p.m.) So, what’s with the 5:15 PM NY time to which the Kitco site refers?

The Globex trades Sundays through Thursdays from 6:00 p.m. EST to 5:15 p.m. EST the next day. So, 5:15 p.m. EST is a closing time for the Globex, but the COMEX still closes at 1:30 p.m. EST (silver at 1:25 p.m. EST), and the COMEX remains an important futures exchange for the trading of gold and silver despite growing importance of the Globex. The COMEX is an “open outcry” exchange where live traders execute orders for customers and for themselves. The Globex is an Internet exchange where trades are effected by traders using computers, such as the one on which this blog post is being written. The Globex is very impersonal while the COMEX requires dealing with persons. In time, the COMEX, I suspect, will go the way of the dinosaurs. However, the COMEX will not go away without a fight for it is a cash cow for the COMEX traders.

Of no significance, one page on the Globex website calls the 5:15 p.m., a “closing,” while another page says that there is “a 45-minute break each day between 5:15 PM and 6:00 PM.” Regardless of whether 5:15 p.m. represents a “close” or a “break,” the Globex does not trade between 5:15 p.m. EST and 6:00 p.m. EST, Mondays through Thursdays. In effect, gold and silver trade on the Globex nearly 24 hours a day, except weekends.

Do not confuse the Globex, a futures exchange, with the spot market, and think that you cannot buy and sell gold or silver while the Globex is not trading. The products that CMI Gold & Silver buys and sells are based on the spot market, which is greatly influenced by prices on the futures exchanges, but are not “controlled” by the futures prices. The spot market, also called the cash market, calls for delivery and settlement with 48 hours. The Globex is a futures exchange with delivery and settlement “in the future,” depending on the contract month. The spot market operates anytime a dealer will quote a price. The spot market is definitely open while the Globex is closed. In fact, the spot market is open Saturdays but CMIGS is not open Saturdays.

Further, to the recipients of our Daily Prices, we will continue to email Daily Prices based on the close of the New York markets. Often, significant price changes and trading occur on the COMEX, and it remains, at this time, an important market for gold and silver.

Be reminded that our Daily Prices are “spot prices,” and not futures markets. Often we have callers wanting to know why our prices are different from price seen other places or heard on the news. I can’t say here, for I don’t know all the other sources. Sometimes, though, I know that news outlets will report “trading in New York” but not disclose whether those prices are from futures exchanges or are spot prices.

Finally, it is important to know that there is no final authority on “spot prices.” Major dealers often differ on what they call spot, but the differences are usually small. Often, though, those differences are enough that callers demand to know why our spot prices are different from Kitco’s. Our spot prices may differ from Kitco’s for two reasons.

One, we have to use the spot prices of the wholesalers who supply our coins and bars, and, frankly, those dealers could not care less what Kitco calls spot. Two, the spot prices that Kitco feeds to the Internet sites, including the “spot prices” on our 24-hour graphs, are the bid side of Kitco’s prices. See Kitco’s All Metals Quote page to see that Kitco has bids and asks for the metals it quotes.

Regardless of the small discrepancies, Kitco provides a great service to the precious metals investors by feeding its spot prices to website throughout the Internet.