Annex 3: Wholesale Precious Metals Spot, Forward and Deposits in Precious Metals Basic Market Definitions

These accounts are opened when a Client requires metal to be physically segregated and needs a detailed list of bar weights and assets. The Client has full title to this metal, with the Dealer holding it on the Client’s behalf as custodian.

Represents the actual quantity of Precious Metals in a bar. For example, a Good Delivery Bar may have a gross weight of 403.775 ounces. If it were of a fineness of say 996.4 fine, the fine Gold content or net weight of Gold would be 403.775 x 0.9964 = 402.321 fine ounces.

This could be for a simple purchase or sale of metal for settlement beyond spot, an outright forward or for forward swap transactions. Forward swaps are a simultaneous purchase and sale in which one leg of the transaction is generally for spot value and the other forward, conducted at an agreed differential to the spot leg of the deal. This leads to the terms “borrowing on the swap”, in the case where the spot is purchased and the forward sold, or “lending on the swap” where the spot is sold and the forward purchased, in order to differentiate from leasing metal.

Precious Metals may be placed on deposit, borrowed, leased or lent on unallocated or allocated terms.

Refers to Precious Metals that are physically held in London and comply with LBMA or LPPM Good Delivery standards.

Refers to Precious Metals that are physically held in Zurich and comply with LBMA or LPPM Good Delivery standards.

The basis for settlement and delivery of the Loco London quotation is for delivery of a standard Good Delivery Bar at the London vault nominated by the Dealer who made the sale.

While settlement or payment for a transaction will generally be in US dollars over an account in a New York bank, delivery of metal against transactions in Gold and Silver are in made in a number of ways. These include physical delivery at the vault of the Dealer or elsewhere, by credit to an allocated or unallocated account with the Dealer or through the London Precious Metals Clearing to the unallocated account of any third party.

The physical settlement of a Loco London/Zurich Platinum trade is a plate or ingot conforming to the following specifications:

• Weight: minimum permitted weight is 1 kilogram (32.151 Troy Ounces) and the maximum permitted weight is 6 kilograms (192.904 Troy Ounces)
• The gross weight of a plate or ingot if expressed in grams should be shown to one decimal place; if expressed in kilograms shown to four decimal places; and if expressed in Troy Ounces shown to three decimal places. Weights should never be rounded up.
• Fineness: the minimum acceptable fineness is 99.95 percent.

The physical settlement of a Loco London/Zurich Palladium trade is a plate or ingot conforming to the following specifications:

• Weight: minimum permitted weight is 1 kilogram (32.151 Troy Ounces) and the maximum permitted weight is 6 kilograms (192.904 Troy Ounces)
• The gross weight of a plate or ingot if expressed in grams should be shown to one decimal place; if expressed in kilograms shown to four decimal places; and if expressed in Troy Ounces shown to three decimal places. Weights should never be rounded up.
  
• Fineness: the minimum acceptable fineness is 99.95 percent.

Both Platinum and Palladium Good Delivery plates and ingots must conform to the specifications for Good Delivery set by the London Platinum and Palladium Market Association (LPPM).

These are the lists, maintained by LBMA for Gold and Silver, and by LPPM for Platinum and Palladium, of Refiners of Precious Metals whose standards of production and assaying are such that their bars are acceptable in settlement against transactions conducted between LBMA/LPPM Members and with their Clients. The lists are widely accepted as the international Benchmark, providing the reliable standard for bars traded and delivered around the world. Assessment of applications for inclusion in the lists, together with their ongoing maintenance, is one of the core functions of LBMA/LPPM.

The traditional unit of weight used for Precious Metals. One Troy Ounce is equal to 1.0971428 ounces avoirdupois. The accepted conversion factors between troy and metric are that one kilogram equals 32.1507465 Troy Ounces, and one Troy Ounce equals 31.1034768 grams.

The London Good Delivery Gold Bar. This must have a minimum fineness of 995 parts per thousand and must have a Gold content of not less than 350 and at most 430 fine Troy Ounces. The gross Troy Ounce weight is rounded down to the net lowest 0.025 Troy Ounce interval, but the weight in fine Troy Ounces is expressed to three decimal places as calculated. Bars are generally close to 400 ounces or 12.5 kilograms.

The London Good Delivery Silver Bar. This must be of a minimum fineness of 999 parts per thousand and, for bars produced after 1 January 2000, weigh between 750 and 1,100 ounces. Bars produced prior to 1 January 2000 must weigh between 500 and 1,250 ounces. The weight of bars must be expressed in multiples of 0.1 of an ounce. Bars generally weigh around 1,000 ounces.

Both Gold and Silver Good Delivery Bars must conform to the specifications for Good Delivery set by London Bullion Market Association (LBMA).

This reflects a debit or credit over an account, and the account holder has a claim on the general pool of metal held by its clearer – rather than a specific bar. Therefore, a credit balance on an account means that the owner of the metal has credit exposure to the institution where the account is held. This is the most commonly used method of holding metal.