ROSS NORMAN - A Response to The LME Issue

In response to Andy Home's article :

LME : We need to talk about the LONDON METAL EXCHANGE: Andy Home

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Visualize the scene - a man in the open seas and struggling.

His fate is inevitable and the only uncertainty is whether he dies by drowning or is taken out by the increasing number of sharks that are circling. In the scheme of things it is immaterial, nature will take its course. He spies a small swimmer moving confidently past and he declares "if I can stand on his shoulders I will be saved". That insanity, in a nutshell, is the position that the LME finds itself in, if Andy Home's article is accurate.

The LME has found itself in an invidious position - through a combination of greed and mindlessness, it sold out to an Asian exchange, who on their side clearly did not understand what they were buying - and they massively overpaid ... to the enrichment of a modest few. Generosity towards either side is hard to engender. The HKeX are now trying to milk the LME vigorously to recoup a dividend, but are unable to do so because the members are in revolt over higher fees - and correspondingly volumes are in sharp decline (but rising in Asia). The CEO has gone and the exchange is vulnerable. Meanwhile new alternatives are springing up. The sharks smell blood.    

The idea that the LME might be saved by moving into precious metals has no merit. And if it did, it would merely pass our market into the willing hands of the Asians. In short, the LME are exporting their cancer.

You perhaps get my position - and to be clear - I don't speak on behalf of the LBMA, I have no authority to ... just on behalf of members who are proud to work in a world class, BRITISH institution - the gold market. That companies might pass into foreign ownership is just the natural course of business - indeed I have done so myself - but to allow the core, the centre of the market whether it is the LME, the LBMA or come to that the LSE - to be sold to a rival nation is complete madness. 

Well the LME launches yet another foray in precious metals in June and perhaps it will have more success after numerous failed attempts over the years. Ordinarily one might think they would be cautious over the reputational damage in launching another failed contract but drowning men aren't choosers. The notion that precious metals would migrate towards an institution that has got itself into unchartered territory does not fill me with confidence. And if they were successful ... who's interest would be being served... ???

Ross Norman

 

24 Feb 2017

About the author

Ross Norman

Ross started his business career with business guru Sir Clive Sinclair of Sinclair Research in Cambridge, before joining Johnson Matthey as Gold Refining Manager (then the worlds largest gold refiners), then as a gold trader at NM Rothschild & Sons (the Chairman of the London Gold Fixing) and later Credit Suisse, where he was a Senior Dealer in physical bullion trading.

Ross has an enviable record within the London Bullion Market in forecasting the gold price over the last decade and is frequently sought by the media for commentary on the bullion markets. Ross has made frequent appearances on TV (BBC, CNBC, CBC) in newspapers (FT. Wall Street Journal) as well as in the newswires (Reuters, Bloomberg and Dow Jones).

e: ross.norman@sharpspixley.com