| This is pretty awful, but it seems like one of these problems that could and should be solved by the free market. If prices rise due to increased demand, the free market usually solves it by increasing supply. In this case, Goldman doesn't actually use the aluminium. I guess that suppliers don't ramp up production because Goldman slowly sells the aluminium back to the market. The purpose is probably to influence the price at specific times, and to make it more volatile in general. Which counters the purpose of exchanges and futures contracts. Somebody should just start a new metals exchange that caters to the needs of its clients rather than trying to squeeze them. The clients of the exchange are aluminium consumers and suppliers, and they have different needs: while the consumers prefer low prices, suppliers want them high, to get a better margin. If prices were lower at one exchange (good for consumers), two things would happen: 1: Suppliers would sell their products at another exchange for a better price. Lower supply at the cheap exchange means that prices rise. 2: Arbitrageurs would buy at the cheap exchange and sell at other exchanges. Increased demand also leads to rising prices. There is no reason why America has to do its metals trading in some ancient London exchange. True, but "America" chose to trade in Olde Europe: aluminium was available at the New York Mercantile Exchange until 2009. |