OTC Trading in the Year of the Pandemic

In this week’s webinar, Adrian Ash, Director of Research, BullionVault, David Gornall, Senior Advisor, LBMA and Fergal O' Connor, Lecturer in Finance, Cork University Business School drilled down into LBMA Trade Data to reveal new insights into the shape, depth, and latest developments in the OTC precious metals market. The trio looked into gold OTC volume and price action during key events throughout the last year. During the initial COVID crash, while the S&P500 was falling, gold volumes were above average, highlighting the very decent liquidity that prevailed. If participants needed to sell - perhaps due to margin calls in other asset classes - gold had ample liquidity. Similarly, on 9 November, as the gold price dropped 4.6% on the back of the Pfizer vaccine announcement, gold remained liquid with volumes within 1 standard deviation of the average (33moz). Both events, even with prices moving in different directions, showcased gold’s strong liquidity.

The 2020 data shows that the London OTC market (spot and forward/swaps) is broadly the same size as the CME futures market, but the data showed that one market can overtake the other at times. Fergal showed some new charts including a day of the week effect which illustrated that Monday and Friday have the lowest volumes of the week, yet that difference is rather small at ~3.5moz. David highlighted that while typically spot dominates daily trading volumes at ~20moz and forwards usually ~10moz, when volumes hit a record high of 89.4moz in August 2020, this reflected a surge in forward volumes to ~60moz. From a trading perspective, these insights offer a very important tool.

The conversation offered up many more insights into this important dataset.

21 January 2021