LBMA overstates silver inventories, gold price stalls despite record inflation, what's going on?
London Bullion Market Association (LBMA) overstated their silver holdings in April, an error which they later rectified.
Previously, they had reported 1.15 billion Troy ounces of silver in stock, when in fact the correct figure is 1.14 billion Troy ounces.
In a statement released to Kitco News, the LBMA stated that “The incorrect information regarding March silver stocks, which has now been amended, arose from an incorrect data submission. There is no link between this reporting error in March and the activity in the silver market at the end of January.
LBMA is working to ensure such a mistake does not occur in the future. We are reviewing internal submitter controls, as well as looking at controls in place for trade reporting and other market stock reporting that can potentially be brought across to safeguard precious metal vault stock submissions.
Currently, LBMA queries any submission which is off-trend (i.e. substantially higher/lower) than previous submitted numbers and asks for the submitter to reconfirm their numbers. This check is in place to avoid any miscalculations or “fat finger” errors arising. This process was followed during the March data submission. However, when rechecking this number, prior to submission of April silver stocks data, the submitter identified and disclosed the error, which was immediately rectified by the LBMA.”
Jeff Christian, managing partner of CPM Group, said that this was an accounting error.
“It looks like an accounting error, a mistake on the part of one of the depositories reporting to the LBMA how much metals they had at the end of the month. It doesn’t look like it had anything to do with attempts to squeeze market,” Christian told David Lin, anchor for Kitco News. “We talked to the LBMA, we talked to some depository managers, and it looks like it was a mistake.”
On the gold market, Christian noted that while gold did not rally this week on the release of the higher-than-expected headline inflation numbers of 4.2%, the yellow metal did rise all month on the back of higher inflation expectations already.
Importantly, interest rates rose significantly on the news, with the 10-year U.S. Treasury bond yield hitting 1.7% Thursday, while the market digests the fact that inflation may not be persistent, and only temporary, as 4.2% inflation on an annualized basis uses last year’s very depressed prices as a base.
More broadly speaking, Christian said, gold does not react to inflation as much as it does to other factors, including real interest rates, investment demand, and geopolitical risks.
For more information on Christian’s outlook on the gold price and his assessment of current global geopolitical risks, watch the video above.