'Free money' for banks as investors pile into fractured gold market

Section:

By Peter Hobson
Reuters
Monday, September 21, 2020

LONDON -- Banks are making huge profits from gold as investors flood into a market fractured by the coronavirus crisis.

The world's largest 50 investment banks are on track to double their income from precious metals this year to around $2.5 billion, most of it from gold, Coalition, a banking consultancy, told Reuters.

"$1.2 billion was the earnings pool last year. This year we already crossed that number," said Coalition research director Amrit Shahani.

... Dispatch continues below ...



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The juicy rewards, which have not previously been reported, mark a stunning reversal of fortune for bullion banks. In March some had to wipe hundreds of millions of dollars off their trading books as the global pandemic snarled the supply of gold bars.

That disruption sowed the seeds for the current bonanza.

Stung by the losses, many big banks lowered their trading limits on the Comex exchange in New York, the biggest gold futures market, creating a lack of liquidity that pushed prices there above prices in London, the main hub for trading physical gold, and elsewhere.

The divergence created a lucrative opportunity for banks that have the infrastructure to buy metal outside the United States and deliver it to New York to profit on the difference, especially during a pandemic, when investor demand has pushed gold prices to record levels of around $2,000 an ounce. ...

... For the remainder of the report:

https://www.reuters.com/article/us-health-coronavirus-gold-trading-insig...

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