Will the LBMA receive an exemption from Basel III rules?

Sam Briggs

29th January 2021

Will the LBMA receive an exemption from Basel III rules?

Andrew Maguire addresses speculation around the LBMA’s attempt to avoid the sting of Basel III rules.

 
Watch this week’s Live from the Vault for:

  • BREAKING NEWS – Exclusive update on Basel III.
  • January volatility explained – bullish conditions ahead.
  • GLD and SLV – the paper market’s Achilles heel.
  • Latest on Basel III impact on gold and silver price.

In this week’s Talking Gold blog, Andrew Maguire breaks down the unquestionable impact of Basel III rules on the London Bullion Market Association (LBMA), alongside the rest of the global gold and silver market, on June 28th 2021.

Basel III delay for LBMA?

At the close of Q2 this year, Basel III will make unallocated gold trading impossibly expensive, with market makers experiencing an 85% haircut on each trade. With tens of thousands of tonnes of fractionally-held gold and silver cleared every year in the London market it’s no surprise that, as Andrew Maguire put it, the LBMA fought “tooth and nail” to obtain an exemption.

Upon citing Covid-19 disruption as justification, the LBMA has been granted a 6-month delay before Basel III rules directly affect day-to-day trading. However, Andrew Maguire believes the key player in the Loco London market will feel the sting of Basel III long before 2022.

Watch Andrew Maguire talk gold and silver price expectations for Q1 and Q2 201 in the last’s week’s fortnightly Kinesis show ‘Live from the Vault’.

EU and Swiss Basel III implementation

Andrew Maguire predicts Switzerland and the European Union’s adoption of Basel III rules in June, will expose the LBMA to these new standards despite the sanctioned delay.

As the primary global physical trading hubs and refineries are centred in Switzerland and Europe, in Andrew Maguire’s opinion, the LBMA cannot completely escape the marketwide effects of this historic ruling. Additionally, all market-making LBMA bullion banks also have a physical presence in the EU and Switzerland.

As Andrew Maguire sees it, the inseparable relationship between these pivotal bullion markets and the LBMA means there is no avoiding the impact of Basel III. The precious metals expert believes the new rules will still impact the hundreds of tonnes of unallocated gold cleared each day in the London market.

What will this mean for the LBMA?

In Andrew Maguire’s opinion, the differing regulation in the markets will open up a massive arbitrage opportunity, at the current diluted unallocated gold prices. Additionally, Andrew Maguire anticipates that LBMA banks, exposed to EU and Swiss compliance, will lose the ability to endlessly shuffle paper markets positions for settlement.

As the implications of Basel III hit the market, the long-time wholesaler predicts a significantly higher gold and silver price into the second quarter of 2021. A prediction only strengthened by the industry-shifting information involving several major European banks and Basel III rules, Andrew Maguire revealed in this week’s episode of Live from the Vault.

Andrew Maguire’s parting thought:

It’s already obvious that no one, absolutely no one, is naked short gold. You’d be crazy.

Next Episode: On next week’s Live from the Vault Andrew Maguire will give you another exclusive gold and silver market update.

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The opinions expressed in this publication are those of Andrew Maguire and do not purport to reflect the official policy or position of Kinesis.

This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.

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