Before Comex – The 1974 Gold Futures Blueprint

The central focus this week is a December 10, 1974 U.S. Embassy cable from London that captured bullion dealers’ expectations just weeks before private gold ownership was restored in the United States on January 1, 1975 and gold futures trading was introduced on COMEX later that year. Dealers surveyed at the time expected the futures market to be dominated by paper trading rather than physical delivery, with large contract volumes relative to very small amounts of metal actually changing hands. They believed futures trading could moderate price volatility, absorb speculative buying pressure that might otherwise flow into the physical market, and reduce the incentive for widespread physical hoarding once Americans were again allowed to own gold. This document is frequently cited because it clearly acknowledges, in advance, that paper markets were expected to dominate and shape physical demand dynamics. Importantly, as David notes, the cable was not a directive to suppress gold prices, but a contemporaneous assessment of how the market was expected to function before it was launched.

David closes with brief commentary on current conditions, noting a strong week for silver and continued price discovery. While a meaningful amount of metal has moved out of exchange inventories, registered stocks remain sizable at roughly 86 million ounces. Given these mixed signals, he remains neutral on near term delivery month speculation and plans to revisit developments in the next Weekly Perspective.

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