London Bullion Market Association (LBMA) officials have loudly proclaimed there are plenty of gold bars in LBMA and COMEX vaults to meet surging demand from buyers.

Unfortunately for them, confidence is particularly fragile these days and cracks are starting to appear. 

Which is why anxious officials there issued not one, but two memos last week in an attempt to reassure traders.

It’s interesting the LBMA, along with the COMEX, felt a need to put out back to back statements. If inventories are plentiful, both exchanges should be busy delivering gold, on time and without delay. The best way to build confidence is simply to meet buyers’ expectations.

The trouble is these expectations are not being met, and officials blaming disruptions related to COVID-19. There are, for example, not enough 100-ounce gold bars in the U.S. to cover demand from those standing for delivery on COMEX futures contracts.

The reason offered is that the Swiss refiners who normally convert 400-ounce bars stored in London to 100-ounce bars needed in the U.S. are temporarily closed. There has also been difficulty in arranging air transport of the gold.

This sounds plausible, but it does not explain a more fundamental problem. Bullion banks sold way more paper 100-ounce bars than they can actually deliver. While there may be lots of physical gold in London, there isn’t enough deliverable gold in U.S. based COMEX vaults to meet delivery demands.

U.S. investors standing for delivery on a contract shouldn’t have to rely on inventory stored in London vaults.

Yet that is exactly what they will have to do. The COMEX changed the terms of their gold futures contract. Now bullion banks can meet delivery requirements with 400 oz bars in an LBMA vault stored overseas.

U.S. buyers might not like getting a partial interest in a 400 oz bar vaulted in London instead of a 100-ounce bar they can take actual possession of here in this country. That is tough luck for them and great news for bullion bankers on the verge of default.

Perhaps the joint statement issued by LBMA and COMEX officials on April 1st was an April Fool’s joke. They claimed a “near record” 8,326 tonnes of gold are stockpiled in LBMA vaults – the equivalent of 666,045 400-ounce bars.

However, they published an inventory number from 3 months ago instead of the current stocks... suspicious to say the least. They also didn’t explain that a large majority of the stored gold is not available for delivery at this time. The vast majority of that gold belongs to the Bank of England, other central banks, and ETFs.

Metals analyst Ronan Manly estimates the actual amount of gold available for delivery is less than 500 tonnes – at least at the current gold price.

Craig Hemke, of TF Metals Report, points out just what a paltry amount that is. The “CME/COMEX posted a total of 290,847 ‘Exchanges for Physical.’ That's a total of over 29MM ounces of gold or NINE HUNDRED METRIC TONNES!!!”

In other words, the LBMA vaults may only have about half of what is needed to cover COMEX “Exchanges for Physical” in London, let alone what is needed by the LBMA directly. Keep in mind, these numbers are just from the first three weeks in March.

It is starting to look like a lot of speculators who hold paper gold and hope to redeem that for actual bars could be disappointed.

Money Metals Exchange and its staff do not act as personal investment advisors for any specific individual. Nor do we advocate the purchase or sale of any regulated security listed on any exchange for any specific individual. Readers and customers should be aware that, although our track record is excellent, investment markets have inherent risks and there can be no guarantee of future profits. Likewise, our past performance does not assure the same future. You are responsible for your investment decisions, and they should be made in consultation with your own advisors. By purchasing through Money Metals, you understand our company not responsible for any losses caused by your investment decisions, nor do we have any claim to any market gains you may enjoy. This Website is provided “as is,” and Money Metals disclaims all warranties (express or implied) and any and all responsibility or liability for the accuracy, legality, reliability, or availability of any content on the Website.

Feed news

Latest Forex Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD retreats below 1.1300 area as NFP-inspired dollar weakness fades

EUR/USD jumped to a daily high of 1.1333 with the initial market reaction to the disappointing November Nonfarm Payrolls data but quickly returned below 1.1300. Rising US Treasury bond yields seem to be helping the dollar stay resilient against its major rivals. 

EUR/USD News

GBP/USDdrops to 1.3250 area as dollar regains strength

GBP/USD spiked above 1.3300 in the early American session with the initial market reaction to the gloomy US November jobs report. However, the greenback regathered strength on hawkish Fed commentary and forced the pair to turn south.

GBP/USD News

Gold struggles to capitalize on weak NFP data, holds near $1,770

Gold spiked to a daily high near $1,780 with the initial market reaction to the disappointing Nonfarm Payrolls data from the US but seems to be having a difficult time preserving its bullish momentum with the 10-year US T-bond yield staying resilient.

Gold News

The bull and the bear case for BTC

Bitcoin price saw a bullish impulse that faced massive headwinds before it tagged a crucial psychological barrier. Bitcoin is likely to experience massive volatility as the situation resolves over time. 

Read more

Cyber Monday 2021 Discounts!

Glued to your trading screen on Cyber Monday? Upgrade your skills by signing up for FXStreet’s Premium service, offered at a discount of up to 50%. Fellow traders have already taken advantage of Black Friday profits. What about you? 

Subscribe now!

Majors

Cryptocurrencies

Signatures