We discuss the curious case of the LBMA sending out threatening letters to the rest of the gold trading centers around the world.
Apparently little UAE has upset the LBMA with their whopping $13 billion in gold market trade, because it might come from Artisanal gold mines in Africa.
These small mines produce gold that could be illicit, and come mainly through the UAE. Though this is such a minuscule portion of the overall global gold market.
The problem with the letter is the LBMA has no authority with any other market; they can only impose sanctions. Of which, Dubai has no certified LBMA gold refineries anyway.
The jist of the story is that the LBMA is panicking over 805 new companies registering on the Dubai gold exchange due to better liquidity, technology, and access to critical African gold deposits which don’t go through the LBMA market.
Adding further trouble is the LBMA bullion bank unallocated gold reserves will not count as high quality assets for bank reserve requirements in the new Basel regulations. This could put many London bullion banks out of the gold market.
The spillover effects onto COMEX, for which the LBMA has been supporting in 2020, are that we could finally see just how illiquid the physical gold is on both of the Western gold exchanges.
This could shift physical gold trade East and away from these major gold hubs, putting a nail in the coffin of their shared hegemony over gold trade (COMEX in futures and LBMA in physical).
Might we be closer to a major physical gold liquidity event on the COMEX and in London in 2021?
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