JOHANNESBURG (miningweekly.com) – By any measure, gold is maintaining its centuries old role as a safe haven and store of value in troubled times, London Bullion Market Association (LBMA) CEO Ruth Crowell stated on Tuesday.

Figures for the first quarter of this year have boldly underlined gold’s continuing importance as a key store of value at times of global economic turbulence.

These figures record that the London gold price rose 5.8% during the first quarter of 2020, from $1 520.55/oz on January 2 to $1 608.95/oz on March 31.

In the same period, leading equity indices fell heavily, with the Standard and Poor (S&P) 500 index losing a fifth of its value, the Financial Times Stock Exchange 100 (FTSE 100) index and the Dax were off and the Hang Seng was down by more than 17%. 

The S&P 500 stock market index tracks the shares of 500 largest-capitalised US companies, the FTSE index tracks the stocks of the 100 highest capitalised companies on the London Stock Exchange, the Dax tracks 30 major German companies trading on the Frankfurt Stock Exchange and the Hang Seng index records daily changes of the largest companies on the Hong Kong stock market.

The London bullion market, a wholesale over-the-counter (OTC) market for gold and silver, involves trading among members of the LBMA, loosely overseen by the Bank of England. Most of the members are major international banks or bullion dealers and refiners. South Africa’s Rand Refinery, based in Germiston, is an LBMA-accredited refinery.

OTC GOLD TURNOVER

The London OTC gold volume increased through the quarter. In the 22 trading days of January, turnover was 850-million ounces, equivalent to $1.32-trillion, which was repeated over the 20 trading days of February.

In the 22 trading days of March, 1 037-million ounces, worth $1.63-trillion was traded. 

In summation, total first-quarter London OTC turnover was some 2 736.7-million ounces, worth $4.32-trillion, up on the 2 000-million ounces, equivalent to $3-trillion, in the last quarter of last year, when there were also 64 trading days.

GOLD MARKET RESILIENT

Gold’s first-quarter price rise included a brief period of exceptional volatility.

In the eight trading days from March 6 to March 17, the gold price fell 12.7% from a high of $1 687/oz to a low of $1 472.35/oz before resuming its steady upward trend.

“The gold market continues to be resilient and durable even in these unprecedented market conditions, but even the safest, most liquid assets suffer occasional, short bursts of volatility and gold is no exception,” Crowell stated in the LBMA release to Mining Weekly.

BullionVault research director Adrian Ash added: “Gold's sharp price swings in the first quarter were in part driven by traders taking profit to cover losing positions in other assets, tapping the unparalleled liquidity of the London market. Gold came into this crisis at 17-year highs, and it has extended those gains as the uncertainty has worsened, albeit on the strongest volatility in over a decade.”

Using the first-quarter London OTC trade data, LBMA has updated its liquidity study for gold and the analysis, again compared with the European Banking Authority’s data, continues to show gold’s outperformance of even formally classified high-quality liquid assets.