Chinese Banks Flee London's Daily Gold & Silver Auctions Then Suddenly Global Bullion Banks Appear at Shanghai Gold Exchange Seeking 'Cooperation'

While Silver Vault Stock in Shanghai Starts to Rapidly Draw-Down

In 2004, the bankers NM Rothschild & Sons announced that they would be immediately departing the gold business after nearly 200 years and that they would also be terminating their role of management of the twice-daily Gold Fix (gold price setting) in their City of London offices with 4 other participant banks.

The daily Gold Fix continued at Rothschild’s premises but without Rothschild official participation until 2015 when a new twice-daily London Bullion Market Association (LBMA) Gold Price Auction was begun with a broader array of market participants. A similar twice-daily auction was also established for the London silver price.

Aside: It should be noted that a ‘price auction’ through the London gold and silver markets are not actual auctions of gold or silver but the price agreed by participants for the purchase of spot (cash) promissory notes for immediate metal ownership which notes are not required to have any allocated gold or silver backing to be issued or traded. These promises can be traded without limit between participants.

Bullionstar analyst Ronan Manly notes that after establishment of the 2015 Gold Price Auction, the LBMA made official announcements after each of 4 major Chinese banks joined the LBMA Gold Price Auction.

However, Manly notes that the Chinese bank participants have now withdrawn from the LBMA’s daily Gold Price Auction (ditto silver) with no announcement of their withdrawal emanating from the LBMA. Even updates of the Gold Price Auction participant list have not reflected these withdrawals in a timely manner as they occurred.

The near silent departure of Chinese banks from participation in the City of London’s Gold and Silver Price Auctions is contrasted with the sudden appearance in 2024 of large global bullion banks suddenly visiting the Shanghai Gold Exchange (SGE) offices each seeking, according to SGE published news releases, ‘cooperation’ in China’s gold and silver markets. The Shanghai Futures Exchange (SFE) has made no announcements about such visits to its offices although they may also have occurred.

During April 2024, there has been an initial spike to approximately a 7x increase in the daily trading volume of silver on the SFE.

Trading Volume SFE Silver Futures Through April 26, 2024.

Of note, at the same time as trading volume accelerated, there has been an increasing tempo of silver bar withdrawals from SFE silver warehouse vaults in late April 2024 with draw-down of 8.5% of the silver stock over a 3 day period in the week of April 26.

The question remains as to what entities are driving the sudden increase in silver trading volumes and the accelerating draw-down of silver warehouse stocks on the SFE.

Are global bullion bankers ramping silver trading volume in Shanghai to acquire liquid and exportable silver bar stocks to cover their short positions in London and NY as claims come due?

The answer is not clear.

We will see with time.

Best regards,

David Jensen