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Precious Metals Data in Focus

Amid a turbulent backdrop of rock-bottom bond yields and high yet seemingly precarious stock valuations, one tried-and-true investment theme is back in fashion: precious metals as a safe haven.

The price of gold futures has increased about 18% over the past four months to $1,528 per ounce as of Sept. 23, just off multi-year highs. Silver has rallied 23% in that span, while platinum and palladium have increased in the order of 15%.

Surging prices have boosted precious metals trading volume, as some traders and investors add ‘portfolio insurance’ ahead of possibilities such as economic recession and a sharp market decline. The increased trading activity brings demand for more and better data to provide the most comprehensive views of global PM markets.

August saw the largest gold trading volume since records began, according to Nasdaq. The total amount of gold traded OTC across all reported asset classes was ~797 million troy ounces ($1.2 trillion USD), which correlates to the jump in the LBMA benchmark price over August which was the second-largest month-on-month increase this year.

On July 9, Nasdaq and LBMA announced an expansion of data available to the precious metals market: the LBMA-i Service was expanded to include daily market information on platinum and palladium, joining existing daily data sets for gold and silver. In a press release, Nasdaq and LBMA said LBMA-i was formed in direct response to the demand for a simplified and cost-effective reporting service covering precious metals trading that improves transparency, generates liquidity and meets regulatory demands.

James McKeone, Nasdaq

James McKeone, Nasdaq Head of European Data, noted that precious metals markets differ from securities markets such as equities and fixed income in that a large percentage of PM trading is transacted over the counter, as opposed to electronically via an exchange or trading platform.

“From a transparency perspective, OTC precious metals are not required to be reported publicly therefore it’s difficult to find data,” McKeone told Markets Media. “In addition, there are other participants over and above those in the equity and fixed income markets, namely refiners, jewelers, and mining companies. This value chain covers many trade and industry groups and is referred to as ‘rock to ring.’”

INTL FCStone is a financial-services firm that provides OTC execution and clearing services for precious metals. Its client base, which includes hedge funds and other market participants, is typically most interested in short-term insights into price action, according to Saakeb Javed, INTL FCStone’s London-based Head of Precious Metals Trading. “The current macro environment has made precious metals the hot topic of note as a risk-off asset class.”

Historically, procuring the right PM market data has been a lift for traders. “The difficulty in the PM space is the wider market does not have reliable access to forward curve data and wider OTC data without having to dig around,” Javed said. “It seems in equities and fixed income you can easily attain this.”

The newly expanded LBMA-i Service “is the only data set that provides information about the OTC portion of the precious metals market. This data was not previously available,” Nasdaq’s McKeone said. “The attractiveness of this data is that it provides real trading information about this timely asset class.”