Working Paper 14
Do Paper Markets Price Physical Scarcity? Futures, Positioning, and Delivery Across Metals Markets
September 2026
Abstract
Whether futures, spot, and physical markets price metals scarcity or something else is a claim made routinely and tested rarely. Gold and silver curves are in clear contango (+472 and +479 basis points annualized, CME, late September 2026), inconsistent with acute nearby scarcity; copper\'s COMEX curve is in steeper contango (+603 basis points) even while the LME prompt touched +$65/t backwardation, a regional and policy-driven split, not a global shortage; gold swap dealers are gross short 60.7 percent of open interest but the CFTC categories do not reveal offsets, so that number is not evidence of bearish exposure or manipulation. Monthly USD and real-rate changes explain 18 to 41 percent of return variance across six metals (n = 55), with tin the most macro-led and zinc unidentified; the residual is unexplained, not evidence of physical tightness. The documented 2022-2026 dislocation episodes were liquidity, conversion, or policy events, each clearing within weeks to months. Paper markets are, on the whole, pricing macro risk and regional plumbing rather than physical depletion.