Gold has rarely been a hotter trade, but the world’s two most important markets remain out of sync. In New York, the price of gold on April 9 topped US$1,750 for the first time in seven years. In London, it still has not caught up.
The dislocation first blew out late last month, when disruptions from the COVID-19 pandemic sparked concerns among traders about getting gold to New York in time to settle futures contracts.
In a chaotic couple of days, the premium for New York futures over the London spot price rose above US$70 — the highest in four decades.
The disconnect has remained wide as some of the world’s largest banks, which are also the top gold dealers, have grown wary.
Gold futures settled down 1.9 percent at US$1,698.80 an ounce in New York, falling 2.5 percent for the week.
Even though there is now plenty of time to get metal to New York for June delivery, the wild moves of recent weeks, and the potential for coronavirus-induced logistical headaches, have increased the perceived riskiness of trading the two markets.
“I would guess that the risk managers are not allowing these big positions to be run,” said John Reade, chief market strategist at the World Gold Council. “It’s moved from a concern about availability and transferability of metal to one of risk appetite.”
There has been some progress. Having traded at as much as US$60 in the past two weeks, by Friday morning the spread narrowed to about US$13 an ounce. Yet that still compares with just a few US dollars in normal times.
In theory, it should be relatively easy for any trader spotting such a wide differential between the two largest gold markets to arbitrage it profitably — by buying gold in London then selling it in New York and profiting from the difference.
One problem is size. The London market trades large 400-ounce bars, whereas only 100-ounce bars and kilobars are deliverable in New York.
Nonetheless, gold refiners around the world produce kilobars, which are the type of gold that is typically used to settle Comex futures and is popular with investors. This means it is usually straightforward to get hold of them and deliver to New York.
The pandemic has made that process more difficult. Gold typically flies around the world on passenger planes, and a vast number of flights have been canceled due to the pandemic. Even though Switzerland’s gold refineries have restarted since early this month, the temporary shutdown made it harder to get hold of certain products.
“Everyone wants to get gold into the same airplane. There’s almost a fight,” said Drazen Repak, head of trading banknotes and precious metals at Zurcher Kantonalbank.
Nvidia Corp chief executive officer Jensen Huang (黃仁勳) on Monday introduced the company’s latest supercomputer platform, featuring six new chips made by Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), saying that it is now “in full production.” “If Vera Rubin is going to be in time for this year, it must be in production by now, and so, today I can tell you that Vera Rubin is in full production,” Huang said during his keynote speech at CES in Las Vegas. The rollout of six concurrent chips for Vera Rubin — the company’s next-generation artificial intelligence (AI) computing platform — marks a strategic
REVENUE PERFORMANCE: Cloud and network products, and electronic components saw strong increases, while smart consumer electronics and computing products fell Hon Hai Precision Industry Co (鴻海精密) yesterday posted 26.51 percent quarterly growth in revenue for last quarter to NT$2.6 trillion (US$82.44 billion), the strongest on record for the period and above expectations, but the company forecast a slight revenue dip this quarter due to seasonal factors. On an annual basis, revenue last quarter grew 22.07 percent, the company said. Analysts on average estimated about NT$2.4 trillion increase. Hon Hai, which assembles servers for Nvidia Corp and iPhones for Apple Inc, is expanding its capacity in the US, adding artificial intelligence (AI) server production in Wisconsin and Texas, where it operates established campuses. This
Garment maker Makalot Industrial Co (聚陽) yesterday reported lower-than-expected fourth-quarter revenue of NT$7.93 billion (US$251.44 million), down 9.48 percent from NT$8.76 billion a year earlier. On a quarterly basis, revenue fell 10.83 percent from NT$8.89 billion, company data showed. The figure was also lower than market expectations of NT$8.05 billion, according to data compiled by Yuanta Securities Investment and Consulting Co (元大投顧), which had projected NT$8.22 billion. Makalot’s revenue this quarter would likely increase by a mid-teens percentage as the industry is entering its high season, Yuanta said. Overall, Makalot’s revenue last year totaled NT$34.43 billion, down 3.08 percent from its record NT$35.52
PRECEDENTED TIMES: In news that surely does not shock, AI and tech exports drove a banner for exports last year as Taiwan’s economic growth experienced a flood tide Taiwan’s exports delivered a blockbuster finish to last year with last month’s shipments rising at the second-highest pace on record as demand for artificial intelligence (AI) hardware and advanced computing remained strong, the Ministry of Finance said yesterday. Exports surged 43.4 percent from a year earlier to US$62.48 billion last month, extending growth to 26 consecutive months. Imports climbed 14.9 percent to US$43.04 billion, the second-highest monthly level historically, resulting in a trade surplus of US$19.43 billion — more than double that of the year before. Department of Statistics Director-General Beatrice Tsai (蔡美娜) described the performance as “surprisingly outstanding,” forecasting export growth
RSS