Make Kitco Your Homepage

Meh... LME to end gold and silver future trading in July

Kitco News

Editor's Note: With so much market volatility, stay on top of daily news! Get caught up in minutes with our speedy summary of today's must-read news and expert opinions. Sign up here!

(Kitco News) -The London Metals Exchange is ending its five-year foray into the precious metals market; however, the move is not expected to impact the gold and silvermarket.

Late Friday, the LME announced that it was withdrawing from trading gold and silver futures contracts through its LMEprecious Service. The decision to end its gold and silver futures was made due to low trading activity.

"The LME Group is working towards an effective date on or around 11 July 2022 for completion of the service withdrawal," the exchange said in a statement.

Trading volume in gold and silver on the LME has been virtually nonexistent for many years. The LME launched its gold and silver futures in 2017 with the help of banking partners Goldman Sachs Group Inc and Morgan Stanley.

The market had some early success, but activity dropped sharply after Société Générale SA closed nearly all of its commodity trading desks in 2019.

When it comes to precious metals, the LME faced significant competition from the CME Group in North America and the Shanghai Gold Exchange in China. While London is a major gold hub, most activity is done through over-the-counter markets.

According to analysts, the move did not come as a significant surprise. It is also not expected to impact the global supply of precious metals.

"It was still a relatively new and small section of the market that has ultimately failed to take off. The decision had been expected for a while and the announcement is just confirmation of it," said Craig Erlam, senior market analyst at OANDA, in a comment to Kitco News.


Gold price gives up $1,900 and silver falls below $24 an ounce, analysts see room for lower prices

Daniel Briesemann, precious metals analyst at Commerzbank, despite the LME announcement as a nonevent.

"We never looked at the LME when it comes to gold and silver," he said in an email to Kitco News.

While the LME's move to end its precious metals contracts is not expected to have much impact on gold and silver, analysts say it is another major blow to the exchange, which comes as it continues to feel the effects of the chaotic nickel market.

Last month the LME faced a major short-squeezes as rising nickel prices forced margins to rise for some firms and prompted margin calls. The exchange was heavily criticized for how it handled the volatility, as trading activity was shuttered for days.

Nickel trading on the LME is yet to recover. Weekly trading activity on the LME's benchmark three-month contract has dropped to the lowest in more than ten years.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.