Are London bullion banks running out of physical gold required for delivery?
These clearing banks (JP Morgan, HSBC, UBS and ICBC Standard) need to keep gold in their vaults for their own loco london liquidity. But it looks like they don’t have any more gold to do this.
They are trying to borrow as much gold as possible via the gold lending market at the Bank of England. But this looks exhausted too.
Dealing with these banks in "gold credit" is a counterparty risk now.
What does it mean? Basically they trade paper/electronic “claims” on gold (or the electronic equivalent) that are meant to be backed by real gold. These claims are now trading at a discount to because they can’t be converted at will into physical due to a lack of real physical gold.
They are trying to borrow as much gold as possible via the gold lending market at the Bank of England. But this looks exhausted too.
Dealing with these banks in "gold credit" is a counterparty risk now.
What does it mean? Basically they trade paper/electronic “claims” on gold (or the electronic equivalent) that are meant to be backed by real gold. These claims are now trading at a discount to because they can’t be converted at will into physical due to a lack of real physical gold.
So these banks are now "borrowing" gold ETF - GLD (SPDR Gold Trust) shares, converting the units to physical gold. Basically stealing from the SPDR Gold Trust and its unit holders. They didnt buy the ETF, just borrowed. This is reflected in GLD borrowing fee that has shot up over last 2 days.
You are using hyperbolic statements. There is no stealing. Its borrowing - as the screenshot clearly mentioned at market rate.
The borrowing rate for GLD was 2.44% yesterday and 6.29% today. Crazy!
I am not sure I understand the issue. Isnt the risk of JPM borrowing gold the same as the risk of JPM borrowing cash from another bank?