Gyroscopic Investing

Bold emphasis is mine:

...
While gold prices are driven by many factors, investors showed high demand for gold as a safe haven asset and, at the beginning of 2025, a notable preference for gold futures contracts to be settled physically. These dynamics hint at investors’ expectations that geopolitical risks and policy uncertainty could remain elevated or even intensify in the foreseeable future. Should extreme events materialise, there could be adverse effects on financial stability arising from gold markets. This could occur even though the aggregate exposure of the euro area financial sector appears limited compared with other asset classes, given that commodity markets exhibit a number of vulnerabilities.[14] Such vulnerabilities have arisen because commodity markets tend to be concentrated among a few large firms, often involve leverage and have a high degree of opacity deriving from the use of OTC derivatives. Margin calls and the unwinding of leveraged positions could lead to liquidity stress among market participants, potentially propagating the shock through the wider financial system. Additionally, disruptions in the physical gold market could increase the risk of a squeeze. In this case, market participants could be subject to significant margin calls and/or have trouble sourcing and transporting appropriate physical gold for delivery in derivatives contracts, leaving themselves exposed to potentially large losses.

https://www.ecb.europa.eu/press/financi ... 3f.en.html

You don't say?

Let's go

That is of course a EU general (global) observation, isn't just a EU/ECB thing, rather a broad/global risk factor observation directed at concentration risk (physical gold largely held by relatively few banks).

Yes there's a high ratio of paper to physical gold, something like >100 times more paper gold than physical gold. It's even higher for silver, that recently peaked into something like a >400 level ratio. But the same also holds for stocks ..etc. derivatives/leverage is massively larger than physical markets as that opens up arbitraging of even small differences profitably - that in turn maintains price alignment around the world and provides liquidity.

The primary point of the article is that its not good when such leverage is concentrated (as it is with gold) rather than being more broadly distributed. Presumably published in order for the EU to take steps/measures to de-risk that risk factor.