Sunday, January 8, 2012

LBMA Gold Trading Volume Would Have Been "Unthinkable" A Decade Ago

£10 trillion worth of paper gold was traded on the LBMA in 2011, an average of £157 billion a day!
What do you think will happen when £10 trillion in paper gold tries to squeeze its way into the physical bullion market all at the same time?
Now apply this knowledge to silver, only amplified 50-100 fold.

From river prospectors to canny investors, why everyone's on the hunt for gold

London has been the centre of the world’s gold market for centuries. The finest gold bars are known as ‘London Good Delivery’ and weigh just over 400 ounces.
Guaranteed to contain at least 995 parts per thousand of gold, they are traded among members of the London Bullion Market Association’s (LBMA) Good Delivery list. Such is the strength of the guarantee the Good Delivery list confers, there is no need for independent verification.
Later, in an office on the 41st floor of the HSBC Tower in Canary Wharf, London, Jeremy Charles, the bank’s global head of precious metals, spells out what this means.
‘It’s the absolute foundation of the London market,’ he says. ‘Without that credibility contracts would be meaningless.’
In the first quarter of 2011 alone, more than £10 trillion worth of gold was traded on the London market.
Broken down into only marginally more manageable chunks, that’s £157 billion of gold bought and sold every day.

Even Charles, who sees a huge number of trades pass through HSBC’s gold desk on a daily basis, describes it as ‘a staggering number’.
HSBC’s gold business never sleeps – as one market closes for the day, another elsewhere in the world is opening. Charles’s team buys and sells gold for wholesale clients such as central banks, investment funds and major gold producers, with the average transaction exceeding £5 million.
Just a decade ago such trading volumes would have been unthinkable.

Photographer David Levenson is one of the few non-staffers to have been granted access to the bank’s gold vault.
‘I had two people watching me at all times, each with two watching them,’ he says.
‘A small army’ was required to usher him into the vault, which was accessed via a labyrinthine series of corridors and doors. Many of these doors could only be opened with two different guards using separate keys simultaneously.
‘Eventually we all squeezed into a lift that went down for what felt like ages,’ recalls Levenson.
‘Stepping out, there was a big iron barred door – the gold was on the other side. The door was opened, and I was in.’
There was no fancy lighting and no hi-tech storage systems, Levenson insists. The different piles of gold were merely marked with Post-it notes and paperwork to say who they belonged to. When gold is traded between parties it is simply wheeled from the seller’s pile to the buyer’s on a trolley.
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