JOHANNESBURG (miningweekly.com) – A new gold futures contract just launched has expanded delivery options, London Bullion Market Association (LBMA) said on Thursday.
The membership of LBMA, a gold and silver trade association, is made up of banks, traders and logistics companies across the world, resulting in it being given custody of the good delivery lists by the Bank of England.
The LBMA also accredits refiners of gold and silver around the world, including South Africa’s Rand Refinery, which is an LBMA-accredited refinery located in Germiston.
The new gold futures contract includes 100-troy ounce and 400-troy ounce LBMA good delivery bars and 1-kilo gold bar.
“The London gold market continues to be open for business,” LBMA stated in a media release.
It reported gold stocks in the London vaults as being healthy, with the latest published numbers showing stocks of 8 263 t of gold.
LBMA has offered to support the global markets CME Group to facilitate physical delivery in New York. CME, the world's largest financial derivatives exchange, trades in asset classes that include metals, agricultural products, currencies, energy, interest rates and stock indexes.
LBMA said it is working closely with the Commodity Exchange (Comex) 100 oz futures contracts where liquidity has been impacted by price volatility. Comex, a division of the New York Mercantile Exchange, trades futures in gold, silver, copper and aluminium.
In the light of the situation around the world brought about by the coronavirus, LBMA is granting all good delivery listed refineries an automatic two-month extension for the 2019 production audits under its responsible sourcing programme.
The current round of proactive monitoring has been postponed until the situation normalises.
“We’re working closely with all refiners and auditors to monitor any new developments,” LBMA stated.
LBMA is looking to elevate the standards of its responsible precious metals sourcing programme.
When responsible sourcing guidance was launched in 2012, the main focus was on ensuring that links with conflicts, money laundering and terrorist financing were broken, and, since then, it has also embraced environmental, social and governance (ESG) enhancement and sustainability.
Described as the fulcrum for the global wholesale and over-the-counter precious metal markets, the LBMA sets standards from the purity, form and provenance of the bars to the sourcing of the precious metals and the way in which they are traded.
LBMA executive board director Sakhila Mirza explained to Engineering News & Mining Weekly in an interview at the Investing in African Mining Indaba, that those accredited by the LBMA are allowed to sell their gold or silver into the London market.
However, governments and exchanges around the world also use this list, known as the good delivery list, to sell their precious metals into other international markets and not just London.
In the gold sector, there are 70 refiners and the LBMA’s responsible sourcing programme requires them to undergo an independent third-party audit every 12 months.
LBMA chief technical director Neil Harby said refiners were required to provide details of exactly where every bit of gold came from, the form it was in, the country of origin and exact amounts.
“We compare that to mine output [and] where the refinery is sending its refined gold,” said Harby.
This would reveal if the refinery had received artisanal-scale mining, or ASM, gold, because the process is audited.
“Last year, we had one very large refinery publicly say that they were not going to take ASM gold from anywhere, because it is too much of a risk. We also have other refineries saying that they are prepared to source ASM gold, as long as it can be done responsibly,” he added.
The next three-year strategy for the LBMA, now under consideration, is focused on elevating responsible sourcing to even greater heights.
“Very broadly, we’ve split that into five areas that we’re going to prioritise over the next three years,” said Mirza.
“Firstly, there is a lot of information that we are receiving from refiners to put out into the public domain, but we need more. We need to push for more transparency, better disclosure and more information.
“Secondly, [we will be] looking at the value chain and where we can use leverage and, again, get more information to provide more transparency so that the entire supply chain is sympathetic to where the risks are and how we can try to mitigate and address them.
“Thirdly, improving the quality of the audit is absolutely critical for this programme to be successful.
“Fourthly, we will be looking at how the LBMA can be supporting the ASM initiatives and providing a safe environment for refiners that have disengaged from responsible ASM sourcing.
“And then, lastly, we’ll be looking at how the LBMA can push for better and higher standards of sourcing gold responsibly. Part of that is working with the mining community to see where we can support mining and mining can support us,” said Mirza.
The Word Gold Council and the International Council on Mining and Metals are already working on improvements.
“What this does for us is that refiners and producers are speaking the same language; [this] really facilitates the handshake of transferring the gold doré from the producers to the refiners.
“A big focus of our programme at the moment is incorporating all aspects of ESG and making sure that we’re telling the good story where there is a good story to tell. Those ESG aspects that are built into our programme and the supporting of producer programmes are really going to come to the fore,” said Harby, formerly of South Africa’s Rand Refinery.
It is crucial for exchange traded funds (ETFs) to hold gold that comes from LBMA refineries. A number of the ETF prospectuses do mention only holding bars from LBMA-accredited refiners, which are obliged to comply with the LBMA responsible sourcing programme.
“There is increasingly more pressure from investors, but also other stakeholders, to understand how various supply chain actors are mitigating risks. “No investor would want to end up having gold, whether through ETFs or other investment vehicles, that has resulted from criminal activities. Our role is to support this and make sure market participants understand why it’s important to hold gold coming from LBMA refineries,” Mirza emphasised to Engineering News & Mining Weekly.
Gold prices fell on Thursday as investors scurried for liquid cash while awaiting the passage of a $2-trillion-dollar US stimulus package to combat the economic impact of the coronavirus epidemic. US gold futures were up 0.3% at $1 639 an ounce.