"Can you clarify, that when you buy from the spot market to back up an order , is it within seconds/minutes. Anything longer and wouldn't that constitute speculation?"
It all depends on deal size. If someone buys 2oz from us, that is just too small to cover with a bullion bank, so we have to wait until we accumulate more "positions" until we have a parcel size big enough to cover.
To protect ourselves until we accumulate enough, we add a margin to the wholesale bid/ask. If you come to us with say 500oz then we can offer a better spread because we can cover that immediately. People who complain about buy/sell spreads often don't realise this, and they usually have a few thousand to trade and want $0.50 spread.
Our Treasury usually has enough deal flow via our various business units to be able to cover frequently. If we happen to be left with a position at the end of the day, our Board set policies require stop losses to be put on.
