Written by Jeff Nielson Friday, 09 April 2010 10:46
Articles & Blogs - Canadian Commentary
Thanks to several Bullion Bulls members for passing along the link to another intriguing issue relating to the legitimacy of the global gold (and silver) market. A follow-up interview from the “King World News” site took aim at the bullion-storage of Bank of Nova Scotia – or more particularly, what they weren't storing: silver.
To provide the context to readers who haven't already absorbed all the relevant issues, there are two other “stories” - one old, one new – which closely relate to the revelations from the Bank of Nova Scotia's bullion-vault.
The first item was Morgan Stanley's bullion-fraud: where it only pretended to buy-and-store bullion for its own clients. Regular readers will already be familiar with this news, as I covered it in July of 2009 (see “Morgan Stanley pay damages for Precious Metals Fraud”). The other blockbuster news that ties in to this issue was the careless revelation by Jeffrey Christian of the CPM Group – yet another Goldman Sachs Stooge actively involved in the banksters' nefarious deeds in the precious metals market.
During the recent CFTC hearings, Christian blurted out that “the gold market was a hundred times the size” of the actual amount of “physical” bullion held by the (so-called) “bullion banks”. While I have long alleged that the banksters didn't have sufficient bullion to cover their gigantic “short” positions and their equally gigantic “custodian agreements” with the fraudulent, “bullion-ETF's” (most notably, GLD and SLV), the revelation that the banksters had leveraged their real bullion by (at least) 100:1 was a shock to everyone.
This sets the stage for the “King” interview with Harvey and Lenny Organ (father and son) along with Adrian Douglas – one of GATA's valiant directors. As a last detail, the Bank of Nova Scotia operates the primary bullion-storage vault for all of Canada and is the Canadian bank which is most active in the infamous “gold-trading” of the anti-gold banking cabal, which is rapidly losing its “grip” on this market, after a quarter century of ruthless price-fixing.
Lenny Organ had been repeatedly requesting access to the Bank of Nova Scotia's bullion vault, in order to verify his own, personal holdings – which he had chosen to buy and store through that bank. He finally obtained his invitation in September 2008, just before the most-massive spike in bullion-buying in decades (after the Wall Street-induced “crash” of 2008).
What he saw inside that vault was that (especially for silver) the “cupboards were bare”. Theentire “working supply” of silver for the BNS was sixty 1,000 oz bars, with each of those bars equaling roughly $15,000 of silver apiece (at 2008 prices). In other words, the total amount of bullion held by the Bank of Nova Scotia (including what it was willing/able to sell) was worth less than $1 million.
Upon seeing that the bank didn't even hold their own bullion (which they paying “storage fees” for), the Organs demanded that BNS produce (and then store) the bullion which italready claimed to hold for the Organs. Incredibly, the BNS demanded additional storage fees and still required more than six weeks to make good on their contractual obligations.
Apart from the enormous time-lag for one of the world's largest bullion-banks to produce the bullion it was already contractually obligated to store, it appears that the banksters have two sets of storage rates for its “bullion customers”. There is the “regular” rate it charges forchumps – i.e. those clients for whom (like Morgan Stanley) the Bank of Nova Scotia onlypretended to buy and hold bullion, and a second fee structure for those clients who insistedthat the bank buy-and-hold real bullion on their behalf.
This is a close parallel to the bullion-ETF market, where investors can invest in the fraud-funds: GLD and SLV, and pay near-zero fees to have these funds store paper on behalf of its unit-holders; or, you can pay much higher management fees to funds like the “Central Funds” group of Canadian bullion-ETF's, or the new, physical gold “trust” from Sprott Asset Management – and know that you're holding real bullion. However, I plan on saying much more about that market in an upcoming commentary.
The gold-holdings of the BNS were not quite as sparse. There was roughly 100,000 ounces of gold storage, with a market value (at that time) of less than $100 million. However, as Adrian Douglas quickly pointed out in the interview, the Royal Canadian Mint had (by itself) sold more than a billion dollars of gold, in 2008 alone. Thus, when Canada's largest “bullion bank” has a cumulative total of bullion (acquired over years and decades) that amounts to much less than 10% of Canadian demand for one year, you don't have to be Sherlock Holmes to conclude we are witnessing yet more bankster bullion-fraud.
The obvious advice to any and all Canadians who think that the BNS is storing bullion on their behalf is to immediately demand to see your bullion, to immediately convert your BNS gold (and silver) “certificates” into real bullion, and then to personally make arrangements to store your own bullion – where your own banker can't sell it to someone else.
One has to wonder if we are about to witness our own “class action suit” on bullion-fraud, similar to when Morgan Stanley was sued in 2005, or perhaps a wave of class-action suits. In the 100:1 world of bullion-leverage in which the banksters dwell, those bank clients (all over the world) who think they own bullion are most likely only holding paper. Indeed, the most-hilarious moment in the “King” interview was Adrian Douglas' observation that the “gold certificates” of the BNS state they are “backed by the assets” of the BNS – but make no claim to actually “back” those certificates with any bullion, at all.
However, while the certificates themselves make no reference to representing actual bullion, the storage contracts from the BNS explicitly discuss fees relating to the buying/selling (and holding) of “metal”. Thus, assuming that the BNS “bullion dealers” understand the distinction between “metal” and “paper”, and assuming that any/every judge is also capable of making that distinction, the case of fraud against the BNS is “open and shut”.
Gold-sector veterans like Jim Sinclair have been urging people (in the strongest terms) tohold their own bullion. Yes, it is somewhat inconvenient and/or costly, but investors have a very clear choice, thanks to the inherent dishonesty of global bankers in dealing in bullion: you can bear with the inconvenience of storing your own bullion, or enjoy all the “convenience” of having bankers charging you to store paper.
As Bullion Bulls members have heard on this site many times in the past, the only “paper” relating to the gold and silver market which investors should hold are the shares of quality gold and silver miners, or they can seek-out the small minority of bullion-ETF's (and related vehicles) which do hold real bullion, but also charge significant management fees.
There are some more, juicy anecdotes in the interview, so I recommend that those who have not listened to it take the time to do so. If nothing else, it helps to verify that the assertions of gold commentators (like myself) are accurately representing the facts which have been dug-up in recent weeks.
In the meantime, while you won't read about any of these events in any “mainstream” media outlet, awareness among the investing public is clearly rising rapidly. This can be seen in the comments which are made any/every time some branch of the propaganda-machine publishes more precious metals “spam”. Articles recommending fraud-funds like GLD and SLV are being greeted with open derision by readers.
While clearly these individuals represent the more sophisticated segment of precious metals investors, their numbers appear to be enough of a “critical mass” to spread the word on what is really taking place in the precious metals market, in general, and insidebankster-vaults – in particular
Scotiabank
From Wikipedia, the free encyclopedia
| Bank of Nova Scotia Banque de Nouvelle-Écosse | |
|---|---|
 | |
| Type | Public TSX: BNS NYSE: BNS |
| Industry | Financial services |
| Founded | Halifax, Nova Scotia, 1832 |
| Headquarters | Toronto, Ontario, Canada |
| Key people | Richard E. Waugh, chief executive officer |
| Revenue | $14.5 billion CAD (2009) |
| Net income | ▲ $3.5 billion CAD (2009) |
| Total assets | $496.5 billion CAD (2009) |
| Employees | 67,802 (Full-time equivalent, 2009) |
| Website | scotiabank.com |
The Bank of Nova Scotia (in French, Banque de Nouvelle-Écosse, and commonly Scotiabankin English and Banque Scotia in French) is the third largest bank in Canada by deposits andmarket capitalization. The bank was founded in 1832 in Halifax, Nova Scotia, and its primary corporate offices are located in Toronto, Ontario.
The company ranks at number 120 on the Forbes Global 2000 listing.[1]
Contents[hide] |
[edit]History
 | This article has multiple issues. Please help improve the article or discuss these issues on thetalk page.
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Founded in Halifax, Nova Scotia in 1832, under the name of the Bank of Nova Scotia, to facilitate the trans-Atlantic trade of the time.[2] The bank launched its branch banking system by opening inWindsor, Nova Scotia. The expansion was limited to the Maritime Provinces until 1882, when the bank moved west by opening a branch in Winnipeg, Manitoba. The Manitoba branch later closed but the experience of doing business in a grain-town encouraged the Bank to expand into the American Midwest, including Minneapolis in 1885 and Chicago in 1892.[2]
Scotiabank also operates locations throughout Mexico, after the purchase of the Mexican bankInverlat, and deals in all aspects of personal banking, business banking, and property and auto loans.
By 1900, The Bank of Nova Scotia had opened 38 branches across Canada, the United States andJamaica. In Canada, the Bank was represented in all of the Maritime Provinces, Quebec, Ontarioand Manitoba. In 1892, the Bank of Nova Scotia became the first Canadian bank to establish inNewfoundland – 55 years before the dominion joined Confederation.
[edit]Early international expansion
- 1885 - The bank opens its first branch outside Canada in Minneapolis.[2]
- 1889 - The bank opens a branch in Kingston, Jamaica, the first branch of a Canadian bank outside Canada, the US, or the UK. By 1931 it has 12 branches in Jamaica.[2]
- 1892 - The bank closes its branch in Minneapolis and transfers the business to the agency that it opens in Chicago, Illinois.
- 1899 - The bank opens a branch in Boston.
- 1906 - The bank opens a branch in Havana, Cuba. By 1931 it has three branches in Havana, and one branch each in Camaguey, Cienfuegos, Manzanillo, and Santiago de Cuba.
- 1907 - The bank opens an agency in New York.
- 1910 - The bank opens a branch in San Juan, Puerto Rico, and later another one in Fajardo.
- 1920 - The bank opens a branch in London, and another in Santo Domingo, Dominican Republic.
In its early expansion the bank clearly followed trade and its customers' business - such as the trade of sugar, rum, and fish in Jamaica[2] - rather than pursuing a strategy of expansion into international financial centres.
Scotiabank is a member of the Global ATM Alliance, a joint venture of several major international banks that allows customers of the banks to use their ATM card or check card at another bank within the Global ATM Alliance with no fees when traveling internationally. Other participating banks are Barclays (United Kingdom), Bank of America (United States), BNP Paribas (France), China Construction Bank (China), Deutsche Bank (Germany), Santander Serfin (Mexico) and Westpac (Australia and New Zealand).[3]
[edit]Mergers
The Bank has amalgamated with several other Canadian financial institutions through the years:[2]
| Bank | Year established | Year of amalgamation |
|---|---|---|
| Union Bank of PEI | ||
| Summerside Bank | ||
| Bank of New Brunswick | ||
| Metropolitan Bank of Canada | ||
| The Bank of Ottawa | ||
| Montreal Trust | ||
| National Trust | ||
| Inverlat (Mexico) | ||
| National Bank of Greece (Canada) | ||
| Banco Wiesse Sudameris (Peru) | ||
| Banco Sudamericano (Peru) |
Many former branches of Montreal Trust and National Trust were rebranded "Scotiabank & Trust", and continue to operate as such.
[edit]Operating Units
Scotiabank has four divisions:
- Canadian Banking is the commercial banking division, offering savings and loan services. It includes 1009 branches , 2,750 ABMs, and 3 call centres. It offers telephone, wireless and Internet banking. Their brokerage unit is called the Wealth Management Group.
- Scotia Capital Inc. is the investment banking division, which helps large corporations, institutions, and governments obtain capital and credit. The Canadian investment banking division is known as ScotiaMcLeod and was formerly known as McLeod Young Weir Co. & Ltd., a company started by four young entrepreneurs: Donald Ivan McLeod, William Ewart Young, James Gordon Weir, and John Henry Ratcliffe. Metals trading is done under the name of ScotiaMocatta. Scotia Waterous is the well-regarded M&A division that operates exclusively within the oil & gas industry.
- International Banking is the merchant banking division, assisting its customers with international trade. Scotiabank's marketing material claims it is the leading provider of financial services in the Caribbean, and that it has the broadest Asian network of any Canadian bank.
- e-Commerce/e-Banking at Scotiabank manages wire transfers and payments.
As of 2009, Scotiabank services over 12.5 million customers and has over 500 billion dollars in assets. The bank employs over 69,000 employees all over the globe including: Europe, Asia,Latin America and the Caribbean. Scotiabank is Canada's most international bank with over 2000 branches in some 50 countries. As in the past, in 2009 some of the top management at Scotiabank announced a plan that it would once again play a part in general infrastructural development in the countries where it operates.[4]
[edit]Corporate sponsorship and branding
[edit]Sports
- Scotiabank currently is the title sponsor for running events that are part of the Canada Running Series: Scotiabank Montreal 21k & 5k (April), Vancouver Half-Marathon & 5k Run/Walk (June) & Toronto Waterfront Marathon, Half-Marathon & 5k (September) and the Scotiabank Bluenose Marathon.[5]
- As of October 2007, Scotiabank became a sponsor of CBC Television's Hockey Night in Canada, and the title sponsor of its Gemini award winning pregame show, Scotiabank Hockey Tonight.[6]
- Scotiabank also is currently the Official Bank of the National Hockey League and National Hockey League Players' Association.[7] And the official bank of the NHLPA, the NHL Alumni, the Canadian Women's Hockey League. Additionally, Scotiabank sponsors the Little NHL (native hockey league) and several girl's hockey festivals across Canada.
- Currently has the naming rights to the arena of the Ottawa Senators, branding it Scotiabank Place.
- Scotiabank can be seen as a primary sponsor for Champion Boxer Miguel Cotto during his 2009 bout with Manny Pacquio
- In 2006 Scotiabank was awarded the title as the official bank for the ICC's 2007 Cricket World Cup. During the event, several stadia and venues across the Caribbean (and Guyana in South America) are to become outfited with Scotiabank automated banking machines.[8]
- Since 2005, Scotiabank has been the title sponsor of the CFL playoffs semi-final and conference final games, with games titled as the Scotiabank East Semi-Finals and Scotiabank West Semi-Finals. This is in addition to being the official financial services provider to theCanadian Football League.
- Since 2008, Scotiabank has been the official team sponsor of Canadian Cricket Team and the title sponsor of National T20 Championship inCanada.
- In 2010, Scotiabank was a sponsor of the World Rally Championship's Corona Rally Mexico.
[edit]Culture
- In 2007, Scotiabank and Cineplex Entertainment partnered up to create a loyalty rewards program called SCENE. The program allows patrons to sign-up for a special card that grants them points which can be redeemed for free movies or concession discounts. Scotiabank customers can also request for a SCENE debit card which gives them points when used. A SCENE VISA card was also launched in early May. In addition, 5 Cineplex Entertainment locations were rebranded as "Scotiabank Theatres".[9]
- For 2007 and 2008, Scotiabank has been the title sponsor of the Scotiabank Nuit Blanche event in Toronto. [2]
- Title sponsor, Scotiabank Giller Prize. [3]
- Scotiabank Hall in the Marion McCain Arts and Social Sciences Building at Dalhousie University in Halifax, Nova Scotia
[edit]Recent events
- On November 6, 2006, two homemade bombs were placed within Scotiabank branches in Mexico City. One exploded, resulting in no deaths, while a second bomb was de-activated. Authorities were previously alerted to the presence of the bombs. A coalition of five leftist guerilla groups which support (but had no known connections to) protests in Oaxaca claimed responsibility.[10]
- In December, 2006 Scotiabank announced it successfully acquired majority control of the fourth largest Jamaica-based Securities dealerDehring Bunting & Golding Ltd. (DB&G) ending weeks of speculation about the bid on the Jamaica Stock Exchange. The deal is expected to cost the Bank of Nova Scotia and it's Jamaican subsidiary between C$80 – $90 Million dollars to close the deal.[11][12][13][14]
- On August 31, 2007 Scotiabank announced it has signed agreements to purchase 79 per cent of Banco del Desarrollo, Chile's seventh largest bank for US$810 million. These agreements are the first stage in a plan to purchase up to 100 per cent of Banco del Desarrollo. Scotiabank will be making a public share offering on the same terms and expects to acquire up to 100 per cent of Banco del Desarrollo, which would be valued at US$1.03 billion.
- In July 2008, E*TRADE sold its Canadian division to Scotiabank for CAN$444 million, as part of a program of selling off non-core assets.[15][16] Scotiabank is investigating the expansion of the E*Trade service to their Caribbean markets as well.[17]
- In October 2008 Scotiabank was considered one of the front-runners to buy Cleveland-based National City Corp. and re-enter the United States market, alongside Pittsburgh-based PNC Financial Services and Minneapolis-based U.S. Bancorp.[18][19] Many local citizens in Cleveland considered Scotiabank as the best option, due to their longstanding absence from the U.S. market, which would've allowed most of National City's operations to stay in Cleveland. Scotiabank, however, backed out of the deal, and PNC would acquire National City withTARP funds on October 24, 2008 after National City became a victim of the subprime mortgage crisis.
[edit]Awards
- 2005 - "Bank of the Year" - For Mexico, the Caribbean and in Jamaica by LatinFinance [20].
[edit]Corporate governance
Current members of the board of directors of Scotiabank are:[21] Ronald A. Brenneman, C.J. Chen, N. Ashleigh Everett, John Kerr, Michael Kirby, Laurent Lemaire, John T. Mayberry, Thomas O'Neill, Elizabeth Parr-Johnston, Alexis Rovzar de la Torre, Indira Samarasekera, Arthur Scace, Allan Shaw, Paul Sobey, Barbara Thomas, and Richard E. Waugh.
Former members of the board include: Peter Godsoe (former President and CEO of Scotiabank) and Cedric Ritchie (Former Chairman).
[edit]Executive Officers
Current members of the Executive Management Team are:[22]
- Richard E. Waugh, President and Chief Executive Officer.
- Sarabjit (Sabi) S. Marwah, Vice-Chairman and Chief Operating Officer.
- Deborah M. Alexander, Executive Vice-President, General Counsel and Secretary.
- Alberta G. Cefis, Executive Vice-President and Group Head, Global Transaction Banking.
- Sylvia D. Chrominska, Executive Vice-President, Human Resources and Public, Corporate and Government Affairs.
- Mike Durland, Co-Chairman and Co-Chief Executive Officer, Scotia Capital and Head, Global Capital Markets.
- Wendy Hannam, Executive Vice-President, Domestic Personal Banking and Distribution.
- Timothy P. Hayward, Executive Vice-President and Chief Administrative Officer International Banking.
- Jeffrey C. Heath, Executive Vice-President & Group Treasurer.
- Robin S. Hibberd, Executive Vice-President, Domestic Personal Lending & Insurance.
- Christopher J. Hodgson, Executive Vice-President, Head of Domestic Personal Banking.
- Dieter W. Jentsch, Executive Vice-President, Domestic Commercial Banking.
- Barb Mason, Executive Vice-President, Wealth Management.
- Stephen D. McDonald, Co-Chairman and Co-CEO, Scotia Capital and Head, Global Corporate and Investment Banking.
- Kim B. McKenzie, Executive Vice-President, Information Technology and Solutions.
- Robert H. Pitfield, Executive Vice-President International Banking.
- Brian J. Porter, Executive Vice-President and Chief Risk Officer.
- Luc A. Vanneste, Executive Vice-President and Chief Financial Officer.
- Anatol von Hahn, Executive Vice-President, Latin America.
[edit]Unionization
Scotiabank has unionized relationships with employees in a number of locations around the world.[23] In Canada, the sole unionized workplace is the domestic banking branch in Deep River, Ontario.
[edit]Membership
BNS is a member of the Canadian Bankers Association (CBA) and registered member with the Canada Deposit Insurance Corporation (CDIC), a federal agency insuring deposits at all of Canada's chartered banks. It is also a member of:
- Interac
- VISA International
- MasterCard in the Caribbean markets
- Plus Network for VISA card users
- NYCE ATM Network
- CarIFS ATM Network
- LINX network ATM network [4]
- MultiLink Network ATM network [5]
- MAGNA Rewards as part of the Scotiabank MAGNA MasterCard.
- Global ATM Alliance
[edit]Sources
Bank of Nova Scotia. 1932. The Bank of Nova Scotia, 1831-1932. Halifax: Bank of Nova Scotia.
[edit]See also
 | Wikimedia Commons has media related to: Scotiabank |
[edit]References
- ^ [1]
- ^ a b c d e f Scotiabank.com - The Scotiabank Story Accessed July 23, 2008
- ^ "Five big banks form Global ATM Alliance", ATMmarketplace.com. January 9, 2002. Accessed June 22, 2007.
- ^ http://www.scotiabank.com/images/en/filesaboutscotia/14734.pdf
- ^ Canada Running Series
- ^ ottawasun.com - Money - Scotiabank signs deal with NHL
- ^ Scotiabank - Official Bank of the NHL and NHLPA
- ^ http://www.stabroeknews.com/index.pl/article?id=56505500
- ^ SCENE Website
- ^ Leftist rebels claim responsibility for Mexico City blasts; demand Oaxaca governor resign - iht,america,Mexico Explosions, 11th Ld-Writethru - Americas - International Herald ...
- ^ http://www.jamaicaobserver.com/magazines/Business/html/20061214T210000-0500_116683_OBS_SCOTIABANK_OFFICIALLY_TAKES_OVER_DB_G_.asp
- ^ http://www.jamaicaobserver.com/magazines/Business/html/20061212T190000-0500_116573_OBS_SOME_DB_G_SHAREHOLDERS_STILL_AWAITING_PAYMENT_FROM_BNS.asp
- ^ Trinidad News, Trinidad Newspaper, Trinidad Sports, Trinidad politics, Trinidad and Tobago, Tobago News, Trinidad classifieds, Trinidad TV, Sports, Business
- ^ Trinidad News, Trinidad Newspaper, Trinidad Sports, Trinidad politics, Trinidad and Tobago, Tobago News, Trinidad classifieds, Trinidad TV, Sports, Business
- ^ Reuters, Accessed July 22, 2008
- ^ Scotiabank Press Release, Accessed July 23, 2008
- ^ Scotiabank talking to E*Trade on Caribbean, Reuters, November 12th, 2008 5:40pm EST
- ^ http://en.wikipedia.org/wiki/NatCity#cite_note-12
- ^ http://blog.cleveland.com/business/2008/11/pncnational_city_bank_deal_dra.html
- ^ Advocate
- ^ Scotiabank.com - Board of Directors, Accessed July 23, 2008
- ^ Scotiabank.com - Executive Management, Accessed July 23, 2008
- ^ T43536-CSR05_1-10
[edit]External links
| Bank of Nova Scotia | |
Chief Executive Officer: Richard E. Waugh | FY 2007 Statistics: Net income: $4.0 billion CAD (▲9%) | Market capitalization: $48.8 billion CAD |Assets: $411.5 billion CAD | Employees: 62,143 | Stock symbols: TSX: BNS NYSE: BNS | Website: www.scotiabank.com | |
| Major brands by financial service | |
| Master: Scotia | Financial group: Scotiabank Group | Canadian banking: Scotiabank | International banking: Scotiabank International |Canadian mutual funds: Scotia Mutual Funds | Canadian brokerage: ScotiaMcLeod | Canadian insurance: Scotia Insurance | Capital markets:Scotia Capital |
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London bullion market
From Wikipedia, the free encyclopedia
 | This article needs additional citations for verification. Please help improve this article by adding reliable references. Unsourced material may be challenged and removed.(March 2009) |
The London bullion market is a wholesale over-the-counter market for the trading of gold and silver. Trading is conducted amongst members of the London Bullion Market Association (LBMA), loosely overseen by the Bank of England. Most of the members are major international banks or bullion dealers and refiners.
Contents[hide] |
[edit]Gold trading
Internationally, gold is traded primarily via over-the-counter (OTC) transactions with limited amounts trading on the New York Mercantile Exchange (NYMEX) and Tokyo Commodity Exchange (TOCOM). These forward contracts are known as gold futures contracts. Spot gold is traded for settlement two business days following the trade date, with a business day defined as a day when both the New York and London markets are open for business. Unlike many commodity markets, the forward market for gold is driven by spot prices and interest ratedifferentials, similar to foreign exchange markets, rather than underlying supply and demand dynamics. This is because gold, like currencies, is borrowed and lent by central banks and in the interbank market. Because interest rates for gold tend to be lower than US domestic interest rates--it encourages gold borrowings so that central banks can earn interest on their large gold holdings--except in special circumstances the gold market tends to be in contango, i.e. the forward price of gold is higher than the spot price. Historically this has made it an attractive market for forward sales by gold producers and contributed to an active and relatively liquid derivatives market.
[edit]Market size
The bulk of global trading in gold and silver is conducted on the over-the-counter (OTC) market. London is by far the largest global centre for OTC transactions followed by New York, Zurich, and Tokyo. Exchange-based trading has grown in recent years with Comex in New York and Tocom in Tokyo generating most of the activity. Gold is also traded in forms of securities, such as exchange-traded funds (ETFs), on the London, New York, Johannesburg, and Australian stock exchanges.
Although the physical market for gold and silver is distributed globally, most wholesale OTC trades are cleared through London. The average daily volume of gold and silver cleared at the London Bullion Market Association (LBMA) in November 2008 was 18.3 million ounces (worth $13.9 billion) and 107.6 million ounces (worth $1.1 billion) respectively. This means that an amount equal to the annual gold mine production was cleared at the LBMA every 4.4 days, and to the annual silver production every 6.2 days.[1]. Clearing data substantially understates the true amount of gold traded due to the netting of trades in the calculation of Clearing Statistics. Actual turnover is perhaps 4 [2] times greater than clearing turnover so that 2008 turnover is estimated as 2,134 tonnes [2].
[edit]Account Types
[edit]Allocated Accounts
Allocated Accounts are accounts held by dealers in clients’ names on which are maintained balances of uniquely identifiable bars, plates or ingots of metal ‘allocated’ to a specific customer and segregated from other metal held in the vault. The client has full title to this metal with the dealer holding it on the client’s behalf as custodian. To avoid any doubt, metal in an allocated account does not form part of a precious metal dealer’s assets. [3].
[edit]Unallocated Accounts
Unallocated Accounts represent the most popular way of trading, settling and holding gold, silver, platinum and palladium. Transactions may be settled by credits or debits to the account while the balance represents the indebtedness between the two parties. Credit balances on the account do not entitle the creditor to specific bars of gold or silver or plates or ingots of platinum or palladium but are backed by the general stock of the precious metal dealer with whom the account is held. The client in this scenario is an unsecured creditor. [3]
[edit]Unallocated Risks
The total quantity of unallocated gold is estimated to be 15,000 tonnes at the end of 2008[4] which supports the 2,134 tonnes on average of spot gold trade through London every day representing 14.2% of the pool. This compares to average daily turnover in UK equities of between 0.34% and 0.63% for the 12 months ending September 2009 [4]. While members of the LBMA provide no information on the backing for unallocated gold the improbably high turnover is suggestive they are operating a fractional reserve system where unallocated accounts are only partially backed by physical gold. Similarly to a bank run this makes LBMA unallocated gold accounts susceptible to loss if a sufficient number of market participants request delivery of physical bullion.
[edit]Other London markets
The London bullion market is distinct from the London Metal Exchange (LME). The latter is the futures exchange with the world's largest market in options, and futures contracts on base and other metals.
[edit]See also
[edit]References
- ^ [http://www.ifsl.org.uk/upload/Bullion_Markets_2009.pdf Bullion Markets 2009
- ^ a b Paul Mylchreest; [Thunder Road Report http://www.gata.org/files/ThunderRoadReport-10-15-2009.pdf]; pg10; 15th October 2009; Retrieved on 21 Mar 2010
- ^ a b Susanne Capano; [A Guide to the London Precious Metals Markets http://www.lbma.org.uk/docs/OTCguide20081117.pdf]; Published jointly by the London Bullion Market Association (“LBMA”) and the London Platinum and Palladium Market (“LPPM”); pg6; August 2008; Retrieved on 21 Mar 2010
- ^ a b Paul Mylchreest; [Thunder Road Report http://www.gata.org/files/ThunderRoadReport-10-15-2009.pdf]; pg11; 15th October 2009; Retrieved on 21 Mar 2010
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