But OTC contracts being non-standard, counting the number of contracts obviously does not work. Accordingly, the best way to measure them is by underlying contract amounts or face values, halving those between reporting parties and taking other steps, as the BIS does, to avoid double-counting. However, these 1999 figures are for major banks and dealers with their head offices in the G-10 countries only. On a more irregular basis, the BIS collects similar information for as close to the whole world as it can. Accordingly, assuming a continuing difference of around the same magnitude, the total global gold derivatives market is on the order of 26,000 to 28,000 tonnes, more than twice the higher estimates of the net short physical position, and almost as large as the stated gold reserves of all the world's central banks put together.
Analysts are unlikely to agree.
I look at it this way. In other words, as I define it, the net short gold derivatives position is the amount by which the total notional value of all gold derivatives exceeds twice the net short physical position, and it must be added to the net short physical position to get a total net short position, i.e. , the amount of gold that the bullion banks are committed to deliver on their outstanding paper. This formula effectively assumes that the net short physical position is fully hedged with zero risk of default but that any derivatives position in excess of twice the net short physical position represents a short position without reliable hedges in physical gold. Of course it is. Here are the obvious possibilities.