Another thread here got me thinking, and I have a question, perhaps a stupid one. If you buy gold, silver, coal, etc, I always assumed that you were buying them stored in a warehouse somewhere, and you actually owned some physical material, or perhaps you own it in a warehouse where it is coming and going, and you don't own a particular pile of gold or coal, but a company which buys it from producers and sells it to consumers and always has a certain inventory owns it transiently, and you own an amount of whatever they have at a given time, or something vaguely along those lines.

But is that how it works? Or is it more like "Gold is being purchased from producers at $xxxx per ounce, we're a trading company, we have no physical materials, but give us $xxxx and when you decide to cash in we'll give you the amount of money that amount of gold would have been worth if we did actually have it sitting under our desk"?

I don't know how it works, but even if there is a legal obligation to have the physical gold (or relevant commodity) in a company's inventory somewhere, I'm sure some of them illegally 'trade' fictional resources, so they're more like a form of bookie.

Somewhat similarly, I was considering trading forex, but the prices were being given to me through the company itself and I couldn't find a way to cross reference them to a universally-recognised list of prices, and without that transparency I couldn't see anything from stopping them from saying "Oh, too bad, the currency you bought went down before you sold it" even if it went up, and they could just suck some money out of me without ever even making any currency exchanges. Paranoia perhaps, I don't really know.