December Gold Delivery in Jeopardy? CME Declares Force Majeure at Manhattan Gold Depository

The CME declared a Force Majeure Monday at PAMP’s Manfra, Tordella and Brookes Inc. gold depository, and stated the depository will not be able to deliver physical gold due to “operational limitations” from Hurricane Sandy.

The only thing that surprises us is that HSBC and JPM’s gold depositories were not included in the announcement.  It appears however that for now, those holding MTB warrants will be able to receive gold from Brinks.  The inconvenience and extra cost associated with arranging delivery from Brinks however will likely dissuade many from standing for December delivery, and is likely the true motive for the announcement.   How convenient for the bullion banks in the midst of a physical gold shortage!  ”Um, sorry sir, we apologize, Brinks is having trouble getting through the backlog of MTB delivery requests.  We expect your gold should be delivered sometime in January- February at the latest!”.

NEW YORK–CME Group Inc. (CME) on Monday said that Manfra, Tordella and Brookes Inc., one of the exchange’s gold depositories, will not be able to deliver metal as the lower Manhattan company deals with “operational limitations” almost a month after the arrival of Hurricane Sandy. reports that the Force Majeure will free MTB from the liability of breaching gold delivery contracts:

MTB, one of five depositories licensed to deliver gold against CME’s benchmark 100-troy ounce gold contract, held 29,276 troy ounces of gold and 33,000 troy ounces of palladium as of Nov. 23, according to data from CME subsidiary Comex.

In a notice to customers on Monday, CME declared force majeure, a contract clause that frees parties from liability due to an event outside of their control, for the facility.

CME said that individuals holding MTB warrants, or certificates for a specific lot of metal stored in the depository, may receive gold delivered from Brinks Co. (BCO) in New York. MTB is responsible for any additional costs incurred by customers receiving metal from Brinks, CME said.

The CME states that those wishing to stand for December delivery should not be adversely affected by the Force Majeure:

“This shouldn’t have a material impact on the way market participants are doing business,” a CME spokesman said. ” They’ll still contact MTB if they want to take delivery on contracts,” and MTB will arrange for delivery through Brinks.