It is always positive for gold when new precious metals products are launched. This demonstrates that the demand for and interest in the metal is not only stable but improving and growing. In the last few days, gold and silver have received this vote of confidence as a new range of precious metals offerings will soon start trading in London. This should provide resilient gold prices with even more support in the coming year.
New Gold and Precious Metals Products and Partnership
The World Gold Council is the strongest promoter of the safe haven metal in the world. In the second week of August they announced an exciting collaboration with several key market and industry players in London to come out with a whole suite of new precious metals products. This is called the LMEprecious. The new platform for trading the precious metals is a joint venture between the The London Metal Exchange, World Gold Council, and a diverse variety of important international banks. Among the investment banks participating in the new exchange are Goldman Sachs, Morgan Stanley, Societe Generale, ICBC Standard Bank, Natixis, and OSTC. This new suite of products will be traded on the new exchange and centrally cleared. The LMEprecious is set to launch in the first six months of 2017 once they finish clearing it through the regulatory approval process and testing out the integration of the system.
This LMEprecious will increase the choices available to members of the precious metals community. It will offer a new means for discovering price, trading, and managing risk in an advanced market structure. Many market players feel that gold will benefit from a greater transparency that the exchange pledges to provide. The initiative promises to increase access to the market and make it more efficient to trade gold. Besides this, it will strengthen London’s already important position as a world gold and precious metals trading center.
Importance of the London Gold Market for the New Products
London has been a world gold trading center since the early 1700s. At the time, gold mined as remotely as Brazil arrived in London for assaying and refining. This activity only increased from the 1850s. Gold rush deposits from South Africa, California, and Australia arrived to be refined and then later sold on the London markets. The London Good Delivery List developed as a result. Gold trading and mining customers from across the globe began to operate bullion accounts with the different bullion clearing houses in London. This locally based London gold trade became known as Loco London. Soon third party transfers of bullion in London became commonplace. This tradition continues today through the London bullion clearing system and the London Bullion Market Association. Nowadays gold and precious metals bullion are traded around the clock in an over the counter arrangement for transacting spot, options, and forward contracts.
The host of this new LMEprecious exchange will be the London Metal Exchange. This outfit has the honor of being the industrial metals trading world center. Over 80% of worldwide non steel metals trading business happens on their markets. With the already well established London position as a world gold center and the globally leading industrial metals exchange participating, the new products should become a successful offering and make gold trading increasingly available and important. The Chief Executive for the World Gold Council Aram Shishmanian believes this will bring the gold market into a more technologically advanced position. He stated, “This is another important step in the modernisation of the gold market. It will strengthen London’s position in the global gold market, enabling it to meet the needs of all participants, attract new players and satisfy the highest standards of regulatory compliance.
How The New Precious Metals Products Will Work
LMEprecious will include a wide range of offerings for both gold and silver. There will be spot price products, daily and monthly timeframe futures contracts, and options including calendar spreads. These sophisticated contracts allow participants to not only trade current gold prices, but to take positions on various future date prices. Later on, the exchange is going to add contracts for the other precious metals in the complex platinum and palladium. All of the trades will clear centrally on the LMEs real time clearing house the LME Clear. Participants will also have the ability to clear trades that are phone based. The infrastructure for delivering the products is already in place in London. The liquidity for the trading of the contracts will come from the previously mentioned list of banks. Their impressive group of financial institutions which are onboard will guarantee depth in the market and tight, efficient pricing. The partnership is also inviting others to participate if they desire.
It is interesting to note that the new offerings are not intended to replace the already existing over the counter market. Instead they are meant to complement it and bring in new participants to and trading in the precious metals. The increased attention and trading coming to the safe haven metals are good reasons to continue to add gold to your retirement portfolios.
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