The world’s largest 50 investment banks are on track to 2X their income from precious metals this year to around $2.5-B, most of it from gold, Coalition, a banking consultancy said Sunday.
“$1.2-B was the earnings pool last year. This year we already crossed that number,” said Coalition’s research director.
The 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 USDs off their trading books as the global medical emergency chaos tied up 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.
The divergence created a lucrative opportunity for banks who have the infrastructure to buy metal outside the US and deliver it to New York to profit on the difference when investor demand has pushed gold prices XAU to record marks of around 2,000 oz.
Reduced trading by large banks also drove prices of later-dated futures far above near-dated 1s, an opportunity for those with gold to sell it forward for more than enough money to cover the cost of storage and capital.
The confluence of events has created a boom in profits on COMEX.
Have a healthy week, Keep the Faith!