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LCH.Clearnet Accepts ‘Loco London’ Gold As Collateral Next Tuesday

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From GoldCore

LCH.Clearnet Accepts ‘Loco London’ Gold As Collateral Next Tuesday

Today's AM fix was USD 1,640.50, EUR 1,315.87, and GBP 1,038.49 per ounce.
Yesterday’s AM fix was USD 1,624.00, EUR 1,308.94and GBP 1,030.26 per ounce.

Silver is trading at $29.44/oz, €23.74/oz and £18.72/oz. Platinum is trading at $1,524.75/oz, palladium at $628.60/oz and rhodium at $1,025/oz.

Gold climbed $16.60 or 1.02% in New York yesterday and closed at $1,637.60. Silver surged to hit a high of $29.501 and finished with a gain of 1.6%.


Gold in USD – 50, 100, 200 Day Moving Average  (Bloomberg)

Gold briefly popped above the 200 day moving average at $1,643/oz this morning and remains near the 3 ½ month high set in the prior session. A break above the 200 day moving average, after similar breaks of the 50 and 100 day moving averages, will be bullish technically (see chart).

Market watchers are still optimistic that the ECB’s Mario Draghi will bring out the bazooka and unleash more euro paper in the form of the SMP program which would be the icing on the cake for what is an already very bullish gold scenario.

Recent news that the ECB has been creating alternatives to limit Spanish and Italian borrowing costs may have sent gold higher yesterday, increasing its inflation hedge appeal.

Later today the FOMC releases the minutes from its latest meeting and investors will search for clues on when QE3 will occur.

Gold’s remonetisation in the international financial and monetary system continues. 

LCH.Clearnet, the world's leading independent clearing house, said yesterday that it will accept gold as collateral for margin cover purposes starting in just one week - next Tuesday August 28th.

LCH.Clearnet is a clearing house for major international exchanges and platforms, as well as a range of OTC markets. As recently as 9 months ago, figures showed that they clear approximately 50% of the $348 trillion global interest rate swap market and are the second largest clearer of bonds and repos in the world. In addition, they clear a broad range of asset classes including commodities, securities, exchange traded derivatives, CDS, energy and freight.

The development follows the same significant policy change from CME Clearing Europe, the London-based clearinghouse of CME Group Inc. (CME), announced last Friday that it planned to accept gold bullion as collateral for margin requirements on over-the-counter commodities derivatives. 

It is interesting that both CME and now LCH.Clearnet Group have both decided to allow use of gold as collateral next Tuesday - August 28th. It suggests that there were high level discussions between the world’s leading clearing houses and they both decided to enact the measures next Tuesday. 

It is likely that they are concerned about ‘event’ risk, systemic and monetary risk and about a Lehman Brothers style crisis enveloping the massive, opaque and unregulated shadow banking system.

Overnight, Citigroup CEO Vikram Pandit warned in Singapore that risks are set to increase as non-bank financial systems expand, adding that it’s impossible for a regulatory body to “see everything.” 


Cross Currency Table – (Bloomberg)

LCH.Clearnet Group Ltd.  said it will accept loco London gold as collateral for margin-cover requirements on OTC precious-metals forward contracts and on Hong Kong Mercantile Exchange precious-metals contracts starting Aug. 28. Loco London gold are London Good Delivery Bars (roughly 400-ounce or 12.5 kilograms gold bar) held with LBMA members within the London bullion clearing system.

The clearing house has already been using gold bullion as collateral since 2011 but now will accept loco London gold as collateral.

The push to use gold as collateral follows similar steps from a growing number of exchanges and banks to increase the use of gold as an acceptable deposit and collateral reinforcing gold's renewed status as a safe haven currency.

Intercontinental Exchange Inc. (ICE) also has allowed the use of gold as collateral.

LCH.Clearnet limited the amount of gold that could be used as collateral to no more than 40% of the total margin cover requirement for a member across all products and at a maximum of $200 million, or roughly 130,000 troy ounces, per member group.

The move follows the initiative of the World Gold Council, who last year submitted evidence to the Basel Committee for gold to be included in banks’ ‘Tier 1’ assets by European banking regulators, recognising gold’s growing relevance as a high quality liquid asset.

David Farrar, Director, LCH.Clearnet said at the time that “market participants want greater choice when it comes to assets that can be used as collateral.  Gold is ideal; as an asset it typically performs well in times of financial stress, remains liquid and has a well established pricing mechanism.”


Gold Prices/Fixes/Rates/Vols – (Bloomberg)

We pointed out the importance of this development last year but it was ignored by most of the media and even much of the blogosphere.

The CME and LCH.Clearnet both allowing gold bullion as collateral is extremely bullish for the gold market.

With counterparty and sovereign risk remaining elevated, gold is no longer being seen simply as a commodity. Rather, it is increasingly viewed by market participants as an important asset and a currency with no counterparty risk.

We are gradually seeing the remonetisation and indeed the ’financialisation’ of gold, as gold is gradually being reincorporated into the modern financial and monetary system.

This should result in the coming months and years in markedly higher prices than those of today.

Keynes’s ‘barbaric relic’ is becoming less barbaric by the day. However, the man on the street remains completely unaware of this trend and continues to sell gold (jewellery) rather than buy gold (bullion) as clearly seen in the international phenomenon that is 'cash for gold'.

Huge developments in the gold market such as this continue to be ignored by non specialist financial media and its implications not realized by many so called experts. The "experts" and public consensus is that gold is a risky volatile commodity and may even be a “bubble".”

The truth, which is being seen more clearly by the day, is that gold is actually a finite currency and the safest form of money in the world.

For breaking news and commentary on financial markets and gold, follow us on Twitter.

NEWSWIRE
(Bloomberg) -- CME Clearing Europe to Clear London Silver Forwards from Aug. 28
CME Clearing Europe will start clearing London silver forwards from Aug. 28, it said in an e- mailed statement today.

The product will be physically-settled, it said.

(Bloomberg) -- Lonmin Says Marikana Worker Attendance Falls to 22% From 33%
Lonmin Plc said about 22 percent of the 28,000 workers at its Marikana mine in South Africa reported for duty today compared with 33 percent yesterday.

There probably won’t be any significant production restart this week, Susan Vey, a spokeswoman for the company said by phone from the mine today. The mine will be shut for a memorial service tomorrow, she said. “We’re hoping for a complete change” on Aug. 27, she said.

(Bloomberg) -- Peru’s June Gold Output Fell 5.9% to 13,094 Kg, Ministry Says
Peru’s gold production fell 5.9 percent to 13,094 kilograms in June from a year earlier on declines at Cia. de Minas Buenaventura’s La Zanja mine and Barrick Gold Corp’s Misquichilca mine.

(Bloomberg) – Platinum May Rise With Gold For Six Months
Platinum may rise with gold over the next two quarters, Daniel Brebner, an analyst at Deutsche Bank AG said.

Copper “continues to have problems on the supply side,” Brebner said.  Copper is probably going to a have a shortage this year, not a surplus as expected earlier in the year, he said.

(Bloomberg) -- Pandit Says Shadow Banking Is a Major Concern 
Citigroup CEO Vikram Pandit says risks to increase as non-bank financial systems expand, adding that it’s impossible for a regulatory body to “see everything.” He spoke at a speech in Singapore.

? Pandit says investors see opportunity in light regulation in shadow banking

? “Every piece of regulation we are talking about today has but one goal; to enhance the safety and soundness of the financial system. But this goal will not be achieved if all that we accomplish is to impose more requirements on the formal banking sector while leaving the non-bank financial sector relatively untouched.”

(Bloomberg) -- Commodities Enter Bull Market - Gaining 21% 
Commodities entered a bull market, gaining 21 percent from a June low, as grain prices surged after the most severe U.S. drought in half a century and as crude oil rallied amid increased tension in the Middle East.

The Standard & Poor’s GSCI Spot Index of 24 raw materials rose 0.9 percent to end at 675.55 yesterday in New York. The gauge has jumped from this year’s lowest close of 559 on June 21. A gain of more than 20 percent is the common definition of a bull market. Crude accounts for more than 50 percent of index.

NEWS
Gold near 3-1/2 month high on ECB hopes - Reuters

Gold To Rally As Central Banks, Investors Buy, Coutts Says - Bloomberg

Shares slip after Japan exports fall, euro steady - Reuters

Gold Flat in Asia; FOMC Minutes in Focus – Wall Street Journal

COMMENTARY


Why a collapse of the Eurozone must be avoided – Hyperinflation - Vox

What 40 Years Of Gold Confiscation By The US Government Looks Like – Zero Hedge

Is Gold Money? LCH Accepts Shiny Yellow Metal As Collateral – Zero Hedge

Suicidal Skullduggery in the City & Unusually Small Heads on the Street – Max Keiser

 

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Wed, 08/22/2012 - 08:22 | 2726700 hugovanderbubble
hugovanderbubble's picture

Please no tungsten bars allowed

Wed, 08/22/2012 - 08:29 | 2726721 GetZeeGold
GetZeeGold's picture

 

 

Oh no....we'll totally give you a paper receipt for that.

 

Wed, 08/22/2012 - 08:45 | 2726765 Long-John-Silver
Long-John-Silver's picture

Tungsten bars must be allowed with two stipulations, They can't be Gold plated and marked with Gold serial numbers.

Wed, 08/22/2012 - 08:29 | 2726718 Temporalist
Temporalist's picture

Why certainly I have gold as collateral, and yes it originates in London, and why yes it is unallocated, and why yes it's been rehypothecated infinitely...why do you ask?  Do I get my Spider Man towel now?

Wed, 08/22/2012 - 08:39 | 2726749 malikai
malikai's picture

No, you get your spidey towel when you try to withdrawl your gold.

Wed, 08/22/2012 - 08:50 | 2726786 Long-John-Silver
Long-John-Silver's picture

Gold withdrawal will soon be illegal. You can keep it in a certified vault and you can visit it as long as the other owners wait in line to view it. The current wait time to view your Gold is 30 years and the viewing time is limited to 5 minutes.

Wed, 08/22/2012 - 08:30 | 2726722 SilverIsKing
SilverIsKing's picture

I'll gladly pay you with gold on Tuesday for some worthless fiat today.

Wed, 08/22/2012 - 08:31 | 2726725 Croatian Patriot
Croatian Patriot's picture
NO Gold As Collateral, bitchez!
Wed, 08/22/2012 - 08:36 | 2726734 GetZeeGold
GetZeeGold's picture

 

 

Your hypothicated account will self destruct in 5, 4, 3.......

 

Wed, 08/22/2012 - 08:34 | 2726729 Diplodicus Rex
Diplodicus Rex's picture

I have some gold ETFs you can have....

Wed, 08/22/2012 - 08:35 | 2726731 Ted Baker
Ted Baker's picture

UHMMMM!!! THE LAST THING WE NEED IS PHYSICAL GOLD CONFISCATION BY TREASURY AND CENTRAL BANKS ROUND THE WORLD IN THE LONG RUN...THE IRONY IS THAT WARREN MAY HAVE CHANGED THIS MIND AND GONE FROM CLOSING CDS SHORT POSITIONS AND PILING INTO LONG GOLD...MAYBE HE READS ZH TOO..

Wed, 08/22/2012 - 08:41 | 2726751 malikai
malikai's picture

I think your capslock key is broken. You may want to have a look into that.

Wed, 08/22/2012 - 08:52 | 2726792 Long-John-Silver
Long-John-Silver's picture

He was just screaming at the monitor as he typed.

Wed, 08/22/2012 - 09:04 | 2726825 GetZeeGold
GetZeeGold's picture

 

 

Dude....forget it....he's rolling.

http://www.youtube.com/watch?v=V8lT1o0sDwI

 

 

Wed, 08/22/2012 - 08:37 | 2726736 XtraBullish
XtraBullish's picture

Why on earth would anyone take their physical gold and put it with a "clearing house" where, ala Corzine, with one mouse-click, it winds up in the offshore vaults of JP Morgan? "Come into my web" said the spider to the fly...

Wed, 08/22/2012 - 08:39 | 2726748 GetZeeGold
GetZeeGold's picture

 

 

First of all it was a total fluke. Second of all.....they did say they were sorry....

Wed, 08/22/2012 - 08:44 | 2726764 ruffian
ruffian's picture

LOCO LONDON gold is UNALLOCATED GOLD ACCT. This is an account that THINKS it has gold held/vaulted by the Bullion Banks. These are the accounts that really have no gold in them or have one ounce for every hundred supposedly stored. My question would be, why would these clearers accept these fraudulent bullion accts ac collateral..........I post this again.......it is worth a read by everyone

 http://seekingalpha.com/article/257237-time-to-get-precious-metals-out-of-storage-in-london

Wed, 08/22/2012 - 08:46 | 2726768 Tucson Tom
Tucson Tom's picture

Hypothefication on steroids!

Wed, 08/22/2012 - 08:47 | 2726772 Vincent Vega
Vincent Vega's picture

CME & LCH to suffer tragic boating accidents shortly after Aug 28.

Wed, 08/22/2012 - 08:49 | 2726779 youngman
youngman's picture

Just think of how much paper gold the banks will invent to use as this collateral....trillions of ounces...but when it is need to be paid out as a claim...the banks will require the real metal I am sure to pay them off....paper in...metal out...

Wed, 08/22/2012 - 09:04 | 2726822 Kaiser Sousa
Kaiser Sousa's picture

Tradition n yo' face bitch ass, lyin' ass bankers....
FUCK YOU BERNANKE......

Wed, 08/22/2012 - 09:07 | 2726832 francis_sawyer
francis_sawyer's picture

It seems to me that the next parlour trick could easily be to get the sheep running to paper gold & silver... Here's the sketch:

- Pump up the rhetoric of currency collapse

- Allow for modest rise in paper ETF's (GLD, SLV)... Some whales like Soros are already there, so it benefits them...

MEANWHILE

- you have two types out there... Those with investments, those who live paycheck to paycheck

- Some 'paycheck to paycheck' types might see a mild windfall coming from getting better spot prices to sell grandma's silverware

- 401k types, (most of them, at least), are still probably too ignorant to know that they need to own PHYSICAL, & will think they're doing what's sufficient to move to a paper ETF... Most are probably still stuck in the paradigm that if they pull their $$ out of the financial system, they'll be penalized for it... So amazingly, still, they're not thinking PHYSICAL... The financial presstitutes will stroke them with reassurance by saying... "See ~ Buffett & Soros are there & they're not worried"...

- The ones who know better (physical stackers), will be find that the stacking gets tougher (with higher prices, as the bullion follows the spot prices)... Also ~ somewhat curbs accumulation by Easterners in the process...

- They probably squeeze out as much of a price rise as they can manage (perhaps modestly new 'all time' highs in AU & AG)... Once the last of the 401k sheeps are in, they pull the rug with another violent correction...

 

Wed, 08/22/2012 - 10:37 | 2727235 tradewithdave
tradewithdave's picture

You left off the part where they are forced to settle in cash post-gold price crash due to the impending currency collapses entirely from the imposition of capital controls, prohibition of all non-SIFI sales of gold followed by a 2 - price system based on a divorce of "money" into distinct coincidence of wants/store of wealth components. Gold at $300 per ounce but you can't buy it legally or black market SIFI/bancor/SDR gold at $10k per ounce. We'll call it the "heck of a job Brownie's bottom" Lehman moment for the occidental - oriental axis when The City has its Katrina event.

www.tradewithdave.com

Wed, 08/22/2012 - 09:13 | 2726857 LoneStarHog
LoneStarHog's picture

Hey, GoldCrap, don't confuse monetization of gold with voluntary confiscation of scarce physical material to continue manipulation/suppression via derivatives, while supplying scarce physical where demanded.

Wed, 08/22/2012 - 09:15 | 2726861 nathan1234
nathan1234's picture

They will accept the paper certificates !!!

Or will it be only physical ??

Wed, 08/22/2012 - 09:23 | 2726886 torak
torak's picture

When all go to shit, they'll learn how to vaporize gold bars too.

Wed, 08/22/2012 - 09:28 | 2726896 LoneStarHog
LoneStarHog's picture

Bars were vaporized by MF Global and substituted with paper settlement. Test run?

Wed, 08/22/2012 - 09:35 | 2726926 XitSam
XitSam's picture

It's interesting that all of a sudden, gold is being accepted as collateral and made a tier 1 asset.  The financial industry equivalent Cash4Gold stores.

Wed, 08/22/2012 - 09:37 | 2726931 StychoKiller
StychoKiller's picture

In related news, drunks will accept booze in lieu of beer...

Wed, 08/22/2012 - 09:46 | 2726970 Anasteus
Anasteus's picture

This is perhaps more important bullish factor than the fading-out QE concept, in the longterm. It's even useful for the Keynesian scam. Provided the debt is somehow initially rebalanced/remonetized with gold (having ten or twenty times higher price than today of course) the rest is quite straightforward - after flooding new money into the system, gold price soars by the same ratio and the new debt is monetized automatically even without necessity to add a new ounce to collateral :-)) But anyway, integrating gold back to the system, cautiously though, is no doubt a remarkable systemic gold promotion. Seems to me like a new gold rush is underway.

Wed, 08/22/2012 - 09:55 | 2727001 Arnold Ziffel
Arnold Ziffel's picture

"No one saw this coming"....except for the Goldbugs.

Its interesting some smaller local banks are now accepting gold as collateral. My friend just worked out a nice loan backed by his gold. Also interesting is that very same bank will no longer accept accounts receivable as collateral for a loan.

How Barbarian!

Wed, 08/22/2012 - 10:17 | 2727113 The Proletariat
The Proletariat's picture

Last chance to BTFD.....

Wed, 08/22/2012 - 10:20 | 2727128 Remington IV
Remington IV's picture

Hiding it under my mattress

Wed, 08/22/2012 - 11:49 | 2727549 BrerRabbit
BrerRabbit's picture

....and it's gone...

Wed, 08/22/2012 - 12:14 | 2727661 Grand Supercycle
Grand Supercycle's picture

Risk off sentiment ~ SPX 8 hour bearish chart warning continues and FTSE daily chart gives bearish warning.

Of course central bank intervention could burn more shorts and reverse this scenario...

http://www.zerohedge.com/news/2012-12-24/market-analysis

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