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Goldman Sachs Hoarding Aluminum - Essay

Goldman Sachs Hoarding Aluminum

History is filled with examples of financial speculators who tried to make big profits by hoarding commodities like gold, silver and copper. Now, some big users of aluminum, including Coca-Cola [HYPERLINK: http://www.crainsdetroit.com/article/20110626/FREE/306269994/aluminum-bottleneck-cokes-complaint-12-of-global-stockpile-held-here] and MillerCoors, say that the practices of large financial institutions like Goldman Sachs have driven up the price of that important metal.

Unlike investors in the past that bought up the commodities they were trying to control, Goldman is not buying the world's aluminum. Rather, it is storing the metal for other banks, traders and aluminum producers in a ...

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pays incentives to owners of the metal to keep it in the bank's warehouses.

Those delays have bolstered Goldman's profits, because the bank earns more rent the longer metal stays in its warehouses. However, companies that use aluminum argue that the delays hurt them by making them wait for deliveries and can also raise the spot price of aluminum because that price is calculated by a formula that includes a premium based on storage costs. An official at MillerCoors told [HYPERLINK: http://www.banking.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=9b58c670-f002-42a9-b673-54e4e05e876e] a Senate committee that the difficulty in getting metal supplies had cost it and other companies $3 billion last year.

Goldman Sachs says [HYPERLINK: http://www.goldmansachs.com/media-relations/in-the-news/current/goldman-sachs-physical-commodities-7-23-13.html] that its warehouses follow the rules of the London Metal Exchange, a commodity market that regulates the operation of a ...

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Goldman Sachs Hoarding Aluminum. (2013, December 5). Retrieved February 22, 2025, from http://www.essayworld.com/essays/Goldman-Sachs-Hoarding-Aluminum/103422

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PAPER DETAILS

Added: 12/5/2013 05:53:30 PM
Submitted By: frivolous7
Category: Business
Type: Premium Paper
Words: 1214
Pages: 5

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