$5 Billion London Gold Exchange Market Getting Revamp

Competition among some major exchange groups is beginning around the London gold market, one of the world’s largest gold exchanges. The overall market is worth around $5 trillion and is expected to be hotly contested over the next 5 years as groups like CME Group Inc., Intercontinental Exchange Inc., and the London Metal Exchange fight for dominance.

The shakeup has been prompted by the 2008 financial crisis and market regulators pushing for more transparency and risk management, according to Bloomberg. Traditionally, gold exchanges are done through decentralized dealer-brokers with no need for clearing houses to manage risk or collect fees. However, the London Bullion Market Association is reworking OTC deals to create safer exchanges for gold and other precious metals.

While the LME is primarily a base metals exchange, in August it announced plans to become a clearing house for gold and silver, with a plan to eventually add platinum and palladium. The LME has backing by major financials like Goldman Sachs. Central banks, which still use gold as a core reserve, also have a big stake in the outcome.

“We’re going to see five years of turmoil in this market before things settle down,” Tony Dobra, an executive director at the U.K.’s biggest gold refiner, Baird & Co., “The good old London OTC market will keep soldiering on until we see some sort of consensus.”

Get Peter Schiff’s most important Gold headlines once per week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning more about physical gold and silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!