LME abandons attempt to enter gold market

The LME project sought to move trading to an exchange comparable to the Comex in New York, providing more price transparency. It had some success initially, but volumes fell sharply after Societe Generale SA, one of the original LME partners, closed most of its commodity trading business in 2019.

The decision will not surprise the market, given that the contracts have not been traded since 2020. But it is a painful reminder of other problems facing the LME.

The exchange came under fire from investors and traders for its handling of nickel’s contraction last month, when it suspended trading and canceled trading after an unprecedented rise in prices.

Nickel trading on the LME has yet to recover. Weekly volumes on the bourse’s benchmark three-month contract have fallen sharply to the lowest level in more than a decade.

In precious metals, there is still pressure for London trading to move in a more transparent direction. In November, the FICC’s Markets Standards Board, a working group of investors and banks, recommended greater use of central limit order books and central counterparties, which are common to exchanges.

Other members of the LMEPrecious consortium included ICBC Standard Bank Plc, Natixis SA, proprietary trader OSTC Ltd. and industry group World Gold Council.

The LMEprecious service is expected to retire around July 11, the exchange said in a notice to members. It made the decision “after discussions with market participants, and in view of the low levels of trading activity within the LMEprecious market.”

At the height of its popularity, more than 3 million ounces of gold were traded each week through the main LME contract. That’s dwarfed by the more than ten million ounces a day typically traded on the OTC spot market, according to data from the London Bullion Market Association.

(By Eddie Spencer)

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