The End of the LBMA Is Nigh
The comments below are an edited and abridged synopsis of an article by Goldmoney Staff
Basel 3 is about to regulate the LBMA out of existence. With it will go all of the associated arbitrage business and position-taking on Comex because most bullion bank trading desks will cease to exist. The only supply to buy-side speculators of gold and silver contracts will be producer hedging.
Recently there has been talk about the introduction of Basel 3 regulations and the implications for precious metals trading. These new regulations are scheduled to be introduced for European banks at the end of June, and in the UK from January 1, 2022, affecting all LBMA-member banks.
This article explains the new regulations and concludes that the recent joint LBMA/WGC consultation paper addressed to the British regulator is unlikely to save London’s unallocated gold trading market. Because Basel 3 regulations are scheduled to be introduced to the UK at year-end, all London gold market banks can be expected to wind down their exposure ahead of the deadline.
The unallocated forward settlement market will effectively be shut down. Hedging into Comex futures from this source will also cease. As it is unwound, the withdrawal of synthetic supply has enormous implications for future precious metals prices by transferring pricing power to physical markets, now dominated by China.
Up for discussion: Introduction; the London shell game; the impact on physical precious metals; central bank involvement; and conclusion.