The COMEX is a market that is heavily regulated, and it is where futures contracts and options for metals are transacted. Futures contracts and options on metal focus on the value of the metal at a future date and time. This is in contrast to spot contracts, which focus on the value of the metal at the current time. The current exchange rate that applies to buyers and sellers engaging in a spot transaction for immediate delivery is referred to as the spot market price of gold or other commodities.
Silver, gold, and copper futures are all traded on COMEX in conventional contract sizes, in addition to the smaller ones. Steel, platinum, palladium, and aluminium are some of the other commodities whose futures contracts are traded on the COMEX. Due to the fact that the futures market is largely utilised as a tool for hedging against market volatility, a large number of futures contracts are never really fulfilled. The fact that these paper metals promise they can be fulfilled is enough to reassure the investors, market makers and traders. Even though the COMEX does not prohibit the delivery of actual metals, less than one percent of all trades end in the actual delivery of the metal.
Manipulation through COMEX
Many people are under the belief that large banks and hedge funds are manipulating prices through the use of COMEX. The details of their manipulation are unknown, but it's not out of the question that they did it. One of the most straightforward methods that large players can use to influence the market is short-selling by using futures contracts which will dump the spot price of the market. Another better and highly illegal way to manipulate the market is spoofing. Spoofing is essentially placing a lot of buy or sell orders on the future market with no intention to actually execute them. The hedge fund traders follow orders and rapidly place and cancel limit order which trick the market participants.
Michael Nowak and Gregg Smith, both formerly working as metal traders at J.P. Morgan, have been found guilty of engaging in a multi-year market manipulation operation that involved fraud, price manipulation, and spoofing.