HSBC Lost $200 Million In One Day “On Paper” As Coronavirus Dislocated Gold Market

Due to an “unprecedented widening” of gold Exchange for Physicals

(Silver Doctors Editors) HSBC lost a lot of money.

In one day.

At least “in theory”, anyway.

From Reuters:

HSBC Holdings Plc suffered mark-to-market losses of about $200 million in a single day in March after gold prices in London and New York diverged dramatically, the bank said in a filing.

The losses by HSBC, one of the world’s biggest bullion trading banks, are theoretical, reflecting the value of positions it held. They do not necessarily mean it lost money.

HSBC said in the filing that the issue was mainly due to an “unprecedented widening of the gold exchange-for-physical basis, reflecting Covid-19-related challenges in gold refining and transportation, which affected HSBC’s gold leasing and financing business and other gold hedging activity”.

It declined to comment further.

The exchange-for-physical, or EFP, is the difference between the price of U.S. gold futures and spot gold in the London market.

Usually, the two trade within a few dollars of one another, but coronavirus containment measures in March closed several precious metals refineries and grounded many planes, creating fears that it would be impossible to move gold to New York to meet contract obligations.

Harvey Organ had a few interesting things to say about the market disconnect and the London/New York spot versus futures spread.

Read Harvey’s latest update on Silver Doctors right here.

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