There has been a
lot of speculation recently about how much gold is held in London against
unallocated accounts, see some examples below:
Bix Weir: "... stay
away from COMEX/LME good delivery gold and silver bars ..."
Arnold Bock: "... there
is little bullion in storage at the London Metals Exchange or New York's
Bob Chapman: "... Do
you really think that the COMEX and LME would deliver the gold even if they
had it ..."
"Many of them apparently prefer to have their gold in vaults near where
they are, Mr Smith’s “middle of nowhere”, rather than in
LME or COMEX warehouse receipts."
Jim Willie: "A
clearinghouse held a Letter of Intent to supply the London metals exchange
with 250 metric tonnes of gold bullion."
I am now prepared to finally reveal the truth - there is actually NO gold in
the vaults of the LME
(London Metals Exchange). Now I know this is an explosive claim and I'm sure
you'll want to know if I can back it up with proof. Well, go to the LME
website and tell me where you see gold mentioned?
That's right, gold isn't mentioned. The LME is a base metals exchange and
does not trade precious metals. Problem is this makes the commentators quoted
above, who talk about gold on the LME, look foolish. In my opinion, if you do
see a commentator make the mistake of thinking gold trades on the LME it is
an indication that they don't know what they are talking about with regards
to precious metals and you should treat their analysis with caution.
Gold is traded in London over-the-counter, in other words in direct deals
between counterparties. There is no gold exchange in London. There is the London Bullion Market Association (LBMA), but that is just a trade association and it does not
operate an exchange or have any vaults.
You may think I'm being a bit hard on those who confuse the LME and LBMA. You
might argue that it is a reasonable mistake, since they are both in London and
both deal in "metals".
To that I would say what sort of credence would you give a commentary by a
stockbroker who talked about Pepsi trading on NASDAQ, or Microsoft trading on
the NYSE? Would you feel comfortable following stock advice from someone who
did not know which exchange a stock traded on?
Confusing LME and LBMA is actually worse than that because the LME is a base
metal exchange whereas the LBMA is just a precious metals trade association -
a basic Google search would reveal that.
Sorry, I don't think there is any valid excuse. Getting LME, LBMA and gold
mixed up is a sure indicator that one has no actual precious metals market
experience, an example of ultracrepidarianism. In which
case, how can you trust them to know what is really going on, how can you
know they haven't made other mistakes in their analysis of the gold market?
Bron Suchecki has
worked in the precious metals markets since 1994, when he joined the Perth
Mint as an Administration Officer in their Sydney retail outlet. In 1998 he
moved to Perth to work in the then fledgling Depository division. He has held
a number of roles since then in the treasury, risk and governance areas of
All posts are Bron's personal opinion and not endorsed by the Perth Mint in