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A couple of PM decoupling articles from ZH

ErrosionOfAccord

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#1
CME Urged To Change Physical Gold Delivery Rules Amid Market "Breakdown"

by Tyler Durden
Wed, 03/25/2020 - 11:15
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Over the past decade, one of the most fascinating observations in the world of precious metals has been the bizarre decoupling in the supply/demand dynamics and thus pricing, between paper and physical gold.
And, as we detailed yesterday, that decoupling has become extreme.
A surge in demand for physical gold - that results in precious metal vendors and exchanges becoming sold out in very short notices - has created shortages in some geographical locations that is stressing gold markets drastically.
Don't take our word for it. Even the venerable Financial Times reports that traders have reported and lamented a growing global shortage of gold bars, as the coronavirus outbreak both disrupts supply and stokes demand, "with one business comparing the frenzied buying of the yellow metal with the consumer rush for toilet roll."


Yesterday, Saxo Bank's head of commodity strategy, Ole Hansen, observed that a lockdown is occurring in two biggest gold hubs in the world, New York and London, so many traders are working from home. "This has caused a breakdown in the marketplace", he said.
“There is no price discovery in the market right now,” he said Tuesday morning.​
“If you need to borrow gold in the OTC [over-the-counter] markets right now, you are going to pay a king’s ransom.”
And that 'broken' market is no more evident than in the decoupling between spot and futures markets.

The gap between gold futures on the CME's Comex exchange in New York widened above London spot prices by as much as $80 per ounce - or over 4% - on Tuesday. The two usually remain within a few dollars of one another, and the gap skewed trading in the London market, causing activity to fall as traders feared shutdowns of air travel and precious metal refineries due to the coronavirus outbreak will make it harder to ship bullion from London to the United States to meet contractual requirements.


And so, under pressure from the London Bullion Market Association (LBMA) and several major banks that trade gold, the CME Group has reportedly changed its contract-delivery rules to allow gold bars in London to be used to settle its contracts to ease disruption to trading.
As Reuters reports, London is a key gold storage center, where thousands of tonnes of metal underpin trading, but it uses 400-ounce bars which must be melted down and recast as 100-ounce bars to be accepted by Comex in New York.
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The LBMA and executives at major gold-trading banks asked CME to allow 400-ounce bars to be used to settle Comex contracts, said the two sources, both of whom were involved in the discussions.
“It’s totally logical,” said an executive at a gold-trading bank. “In London there’s no shortage of metal.”
Notably, Reuters admits the sources said the CME had not yet made a decision, and any change to its rules would likely take several days to implement and require regulatory approval.
No matter whether they approve it or not, there are serious cracks starting to appear in the paper gold markets as the world reaches for 'money' as The Fed explicitly admits to infinite dollar debasement capabilities.
https://www.zerohedge.com/commoditi...cal-gold-delivery-rules-amid-market-breakdown
 

ErrosionOfAccord

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ABN Amro Abandons 106 Year Physical Gold Business, Clients Forced To Sell

by Tyler Durden
Wed, 03/25/2020 - 08:22
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Seven years ago - to the day - Dutch megabank ABN Amro changed its precious metals custodian rules to "no longer allow physical delivery."
Have no fear, they reassuringly added, your account will be settled at the bid or offer price in the 'market' and "you need to do nothing" as "we have your investments in precious metals."
Changes in the handling of orders in bullion
On 1 April 2013,. ABN AMRO to another custodian for the precious metals gold, silver, platinum and palladium...
...
You need do nothing. We ensure that we have your investments in precious metals now the new way to handle and administer.​
At the time, we wondered if this was the canary in the coalmine of potential physical shortages in the precious metals markets. Soon after we saw notable selling pressure in the gold markets with Spot (physical) selling leading futures lower...



At the time it was unclear who the "other custodian" was but we now know ABN Amro transferred the precious metal trade to the Swiss bank UBS.
Crucually, however, at UBS, it was not possible for customers to actually request the gold or silver.

Which brings us to today's news from Trouw.nl, that ABN Amro customers will no longer be able to put their money into physical gold, silver or platinum.
The bank will discontinue these three investment products next Friday.

Customers will have to sell their positions before April 1. If that does not happen, ABN Amro will do this for them at the prevailing price.
The driver for this decision appears to new EU regulations as Trouw explains:
Because the physical delivery of precious metals is not possible, a precious metal purchased through ABN Amro is not a “direct investment”.
Because it is a complex product, ABN Amro must comply with additional regulations.
Those rules for European financial markets have been tightened.​
The cancellation of these accounts by ABN Amro brings to an end a history that goes back to the establishment of the Hollandsche Bank Unie (HBU) in 1914, writes gold trading company Aunexum in retrospect.
Interestingly, as this news breaks, spot gold prices are lagging futures as they both are bid...
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With the gold market "breaking down," as we detailed earlier, amid a record surge in demand for physical gold but also a near shut down in supply as the most productive gold refiners, those located in the southern Swiss town of Ticina, namely Valcambi, Pamp and Argor-Heraeus, now appear to be offline indefinitely; we wonder if the timeliness of ABN's decision is more about avoiding the potential blowback from their ultimate fiduciary duty over clients' precious metals investments.
Let's just hope, for the 200o or so private-banking accounts at ABN (and custodied at UBS) that the Swiss bank can get its hands on some of that 'deliverable' before time runs out...
Which anyone who has been to APMEX or any other gold seller in the past few days, has discovered - may not be as easy to source as they hope: