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A Different Kind Of Traffic

A Different Kind of Traffic

November 21, 2016

Chapter 25 in the exclusive series for Dynamic Commodities- becoming a commodities trader

There were few similarities between traffic work in antimony ores and concentrates and precious metals. While deals in antimony always involved travel on ocean vessels and trucks, many time the precious metals did not travel at all. Most of the trade operations procedures in gold, silver, platinum and palladium were by book entry; a credit to one account and a debit to another. The traffic role was more bookkeeping than logistics.

There were occasions where the metals did move but transportation of high-value precious metals bars was by airplane and an armored car. Storage was not in warehouses and terminals but highly secure vaults. Physical movement was the exception and far from the norm. Therefore, the job was to make sure that all the buy and sell transactions were credited or debited to the proper accounts, like a checkbook. The vast majority of deals fell into two categories, OTC or over-the-counter or futures. The OTC deals settled in London, the international hub of the gold and silver business. In the platinum group metals, settlement occurred in the central location of Zurich. There were trades that involved specific bar numbers and weights, allocated metal, and unallocated trades that were simply debits and credits at the world’s bullion banks and depositories.

The most important aspect of the job was to make sure that the accounts all balanced and that the positions in inventory and all markets agreed with the trader’s positions. Traffic was a safety net for the traders and the clerks had to check and recheck that positions agreed throughout the day. When markets were busy, checks and balances occurred every few minutes.  After all, a mistake could cost millions given the vast number of deals transacted each day.

A traffic clerk needed to be meticulously correct and very fast. The prices of the metals moved up and down and the slow methodical approach of a logistical expert was not applicable in the world of precious metals. The job was more of an operations and settlement role than a traffic one. The operations department received and paid for metal, metal sold resulted in receivables.

There was so much to learn. I was used to a business where I had to work quickly and accurately but in precious metals speed took on a new meaning as time was really of the essence. In other areas of the firm, completion of tasks occurred in hours, in the gold, silver and other precious metals seconds were a precious commodity. There was no room for incompetence; the biggest complaint about an employee who was not performing was that they were too slow.

I learned another important lesson during my early days handling traffic for precious metals, to succeed a person needs to be flexible and adapt.

Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities

Post Series: Origin Of A Commodities Trader

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