Exclusive: CME pushed to change gold delivery rules amid coronavirus lockdown – sources

Reuters/Peter Hobson/3-24-2020

photo of stacks of gold at Bank of England gold room“The London Bullion Market Association (LBMA) and several major banks that trade gold have asked U.S. exchange operator CME Group Inc to allow gold bars in London to be used to settle its contracts to ease disruption to trading, sources said.”

USAGOLD note:  COMEX contracts are now denominated in 100 troy ounce increments.  As it stands, if delivery is required it will be made in the form of a 100-ounce bar. The LBMA and gold bullion banks are requesting that COMEX allow substitute settlement in 400-ounce bars that the banks have on deposit in London. “The rule change would obviate the need to reshape and transport metal,” reports Reuters, “meaning it could remain in vaults in London while ownership is transferred. If this happened spot and futures prices could converge and markets trade normally, sources said.” Though Reuters’ sources appear quite convinced that the LBMA’s solution will address the problem, the real test, in our view, will be whether or not exchange customers with contracts on the COMEX (or COMEX itself) can or will accept the 400-ounce bars in settlement – particularly if they are standing for delivery. If not, what happens?

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