The global economy as a whole is suffering, but as business goes, fear in one market is good for another market. Crypto sentiments are currently building upon the fear of Gold shortage to put some momentum in the cryptocurrency sphere.
The crypto sentiments report is currently recording extreme fear, but per the latest reports, the London Bullion Market Association has offered support to CME Group after it was unable to source sufficient gold bullion to physically settle the expiring future contracts. CME is an American derivatives firm.
This new development has sparked some fear in the bullion market, resultantly; a 4% divergence occurred in the spot and Gold’s future price. Therefore, the status if precious metal as safe-haven assets has seemingly being scrutinized.
Bullion and crypto sentiments
Per the reports, on March 11th, LMBA witnessed a record high in daily volumes as gold futures contracts were sold for worth $100 billion. However, after two weeks, the CME Group seemed to be struggling in order to deliver the physical Gold at the settled time.
So now, an expert like Roy Sebag is of the opinion that there could be a strong possibility that banks sold the futures contract without even having the adequate reserves of the assets, and now they are struggling when the order has to be delivered.
1/2 I’ve received some important information relating to what’s going on in Gold markets. Today, some banks failed to deliver physical in the comex bar EFP. As a result, these banks suffered large losses which will soon be announced. They’ve also decided to exit the comex market.
— Roy Sebag (@roysebag) March 24, 2020
On March 24th, the LBMA and various other financial organizations all across the U.K that are involved in gold trade have asked CME Group to permit a different unit of Gold bars for the use of physical settlement of futures contracts.
For bullion trading in London, a 400 –ounce gold bar is normally used, while in New York a 100-ounces of the gold bar is used. So, the futures contracts traded on the New York-based CME Group would automatically involve the standard of 100-ounces.
While the cryptocurrency sphere sees this as a negative for Gold but positive for crypto sentiments as the crypto market is likely to gather investors that are moving away from Gold.