Scotiabank is about to completely withdraw from the LBMA.
This post is a summary of Kinesis Youtube show ‘Talking Gold’ — a fortnightly update from Kinesis Director and precious metals expert, Andrew Maguire, providing a detailed round-up of the recent action in the gold and silver markets.
Insider reports reveal that major market maker, Scotiabank, is set to withdraw completely from the London Bullion Market Association (LBMA), with plans in motion to close its doors permanently by the end of 2020.
The Canadian multinational bank had previously announced some reduction in bullion banking provision, although claiming the bank would maintain its role as a key market maker. Scotiabank’s complete exit from the bullion banking space could have significant repercussions across the gold and silver markets.
For a detailed discussion on the wholesale physical silver bullion shortage with GATA chairman and co-founder, Bill Murphy, watch the week before last’s Talking Gold with Andrew Maguire — episode 13.
Why is Scotiabank closing?
Word of Scotiabank’s forthcoming closure was first revealed in termination notices sent out to their employees, however, the exact cause still remains unclear.
According to industry experts, the shutdown shows all the signs of a forced regulatory decision, following the market rigging lawsuit filed against the bank in March this year. The US court filing showed that Scotiabank supplied 800,000 pages of evidence for regulators investigating the gold and silver trading of the investment bank, JPMorgan.
Does Scotiabank have the physical gold and silver bullion to back its paper positions?
Scotiabank will have to square up all gold and silver paper market positions, as they exit the market. However, questions linger whether the bank has the required physical gold bullion and silver bullion to close its positions.
With an industry source claiming they carried out an audit of Scotiabank only to find its bullion vaults near-empty, the bank seems to have an issue on its hands. If this is the case, the Canadian financial institution will have to square off its naked unbacked, unallocated gold and silver positions.
Implications across the gold and silver industry
The closure of Scotiabank could have widespread repercussions across the gold and silver markets. As the Canadian multinational bank has been leasing gold from other major bullion banks, several major industry players will likely be compromised.
As another of the major market-making banks falls, the task of agents for central banks and the Bank of International Settlements (BIS) grows ever more difficult.
Andrew Maguire’s parting thoughts:
“The trigger for a massive spike higher in gold and silver prices is the wholesale exit of these 1st and 2nd tier bullion banks trading CME Futures.”
Next Episode: Andrew Maguire sits down with the gold and silver industry expert who audited the all-but-empty bullion vaulting system of Scotiabank firsthand.
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