COMEX is usually just a paper market, with almost all positions closed out before settlement.<p>London has paper transactions, but is also a delivery market, where large quantities of real gold change hands. The gold may not actually leave the vaulting system: the transfer can often be accomplished with a warehouse receipt.<p>However, since November last year, clients of the COMEX (often acting through JPMorgan bullion bank) have been standing for delivery, e.g. 62 tonnes in the 2 weeks after Thanksgiving 2024:<p><a href="https://www.goldmoney.com/research/massive-comex-deliveries-since-thanksgiving" rel="nofollow">https://www.goldmoney.com/research/massive-comex-deliveries-...</a><p>Now JPMorgan is standing for delivery of 93 tonnes in February 2025 (3m troy oz, $4bn):<p><a href="https://finance.yahoo.com/news/jpmorgan-plans-4-billion-gold-181226432.html" rel="nofollow">https://finance.yahoo.com/news/jpmorgan-plans-4-billion-gold...</a><p>COMEX has had to scramble to find the physical gold to deliver. The US price went up, creating a spread with London and an arbitrage opportunity. Physical deliveries from the LBMA vaults in London were flown to the COMEX vaulting system in and around New York.<p>If the deliveries cannot be made in New York, there is a rather murky process called <i>Exchange For Physical</i> (EFP), where the client is given a paper promise for gold delivery in London. Not sure if there is client discretion, or if they can be forced to accept EFP by the COMEX T&Cs.<p>I think that COMEX <i>does</i> have the right to cash settle delivery requests, but that would be seen as a soft default, and seriously damage its reputation as a physical market grounded in delivery.
Ah, gold. Some things in the gold market worth being aware of:<p>1) China opened up a new gold exchange [0, 1] recently [2] and started a push to get more active in the market.<p>2) Central banks have been net buyers of gold since around 2007.<p>3) As part of the Ukraine war effort the US confiscated a bunch of money off Russia. It isn't entirely clear [2] what impact that will have on gold but it is conceivable that the risk of holding US dollars is high enough to make something interesting happen. There is a tipping point here somewhere and the US has been looking for it.<p>The basic trend in the gold market is it is in flux and there is a definite question of how the BRICS are interacting with it. I'm interpreting the situation as a revolt against US and British influence over the gold market as the productive capital moves to Asia.<p>[0] <a href="https://en.sge.com.cn/eng_about_Overview" rel="nofollow">https://en.sge.com.cn/eng_about_Overview</a><p>[1] <a href="https://www.gold.org/gold-market-structure/global-gold-market" rel="nofollow">https://www.gold.org/gold-market-structure/global-gold-marke...</a><p>[2] Gold is a sedate commodity.
The article has failed to address the most interesting question: why this spread exists.<p>The most interesting theory is that it's effectively a "bank rank" on "paper gold" issued by London, i.e. traders may fear that there are significantly more claims on gold than physically exists in London vaults. If this market blows up, it would be the most spectacular failure with very significant consequences for global financial markets.
For those interested in broader NYC gold discussion, this recent Bloomberg podcast interviews a gold dealer in the NYC Diamond District:<p><a href="https://www.bloomberg.com/news/articles/2025-02-14/gold-price-nears-new-record-highs-why-metal-remains-so-popular" rel="nofollow">https://www.bloomberg.com/news/articles/2025-02-14/gold-pric...</a>
I clicked this by accident, but then read the full thing after noticing the author was Matt Levine! I'm sure there are other readers here who might appreciate his knowledge and writing style, so I mention it.<p>[ To those who post opinion pieces: Is it against the site rules to have the author listed after the actual title? It would help me in this case and others ]
This was a misleading headline on an opinion piece which required a few minutes of reading political opinion before getting to anything it's really about. This is typical for Bloomberg.
So the gold refiner is the real arbitrageur<p>Because that dont actually have to refine the gold for the differing contracts, they just need to exchange it in London
As this recent gold market perturbation was kicking off, gCaptain laid out a conjecture that follows Cryptonomicon:<p><i>Can we talk about how, before WWII, nearly every village in China had a gold Buddha filled with gems, serving as the local bank?</i><p><i>Can we talk about how the Japanese looted them all and launched a massive sealift operation to stash them in the Philippines?</i><p>[...]<p><i>Or how at least one of the CIA’s secret ship registries was accidentally exposed in the USAID data dump?</i><p><a href="https://x.com/johnkonrad/status/1887856186231263285" rel="nofollow">https://x.com/johnkonrad/status/1887856186231263285</a>