From Goldman Sachs:
Goldman Sachs and Physical Commodities
As part of our activities as a market maker, or intermediary between buyers or sellers, in commodities and commodity futures and derivatives, Goldman Sachs, like a number of other financial institutions, holds physical commodities in inventory.
We also hold other physical commodity operations as investments. This includes Metro International Trade Services, a metal warehousing company we bought in 2010, and which operates under the regulations of the London Metals Exchange (LME).
- We hold an inventory position in a particular physical commodity for the purposes of meeting the needs of our clients or as a hedge for positions in commodity futures or derivatives we assume as a market maker.
- And, to fulfill this market making role, we sometimes take delivery of physical commodities just as we do government bonds and stocks in financial markets.
Recent news reports have inaccurately accused Metro of deliberately creating aluminum shortages and incorrectly asserted that Metro moves aluminum from one warehouse to another in order to earn more rent fees....MORE
- During the financial crisis, warehouse companies played the important role of allowing metal producers, who are often unable to adjust immediately to changes in demand, to store excess metal in the face of weak consumer demand. In fact, LME aluminum inventories more than tripled from 1.2 million tonnes pre-crisis to more than 4.5 million tonnes by the middle of 2009. As a result, large amounts of metal accumulated at some locations.