LBMA Suspends 6 Russian Refiners, Causing Potential Gold Supply Crunch

The London Bullion Market Association, also known as the LBMA, is making headlines this morning following a just-published update to its good delivery list. The list specifies which refiners have been accredited by the association as having met certain standings for their bars to trade on the global markets.

The update to the list specifies that a total of six refiners located in Moscow have been removed from the good delivery list, meaning that their bars are no longer accepted by the association as “good delivery.” All six of the refiners are involved in refining gold bars, while five also refine silver bars at their facilities.

The list of refiners that have lost their accreditation include the follow, as per the LBMA.

• JSC Krastsvetmet (gold and silver) 
• JSC Novosibirsk Refinery (gold and silver) 
• JSC Uralelectromed (gold and silver) 
• Moscow Special Alloys Processing Plant (gold)  
• Prioksky Plant of Non-Ferrous Metals (gold and silver) 
• Shyolkovsky Factory of Secondary Precious Metals, SOE (gold and silver)

While the bars previously produced by the refiners while on the list remain as good delivery bars, as BullionStar highlighted in an article last week, “the point is that no London trader wants those tainted bars.” And while the gold bars are likely to be refined to the same standard and will find buyers elsewhere, “no trader in the London market would want to hold or receive Russian bars which were not on the current Good Delivery Lists.”

The BullionStar had itself previously highlighted the issue that the six refiners had yet to be removed from the Good Delivery List, despite them frequently transacting with sanctioned banks – which goes against current sanctions as well as rules in place by the LBMA, making the suspension inevitable.

However, the trouble with the suspension is that it “would surely accelerate the use of Russian gold as the ultimate currency for non-Western trade,” which poses a major problem for the West as it looks to use sanctions as a means of pressuring Russia for its actions. Even more significantly, it poses a problem in terms of the US Treasury’s global dominance with its reserve currency.

In terms of Russian gold bars currently held by EFT’s, it remains to be seen what will be done by the funds, if anything. The SPRDR Gold Trust (NYSE: GLD) currently has 2.2% of its holdings in Russian bars, while the iShares Gold Trust (NYSE: IAU) has 10.8% of its holdings in Russian bars and the iShares Silver Trust (NYSE: SLV) has 7.1% of its holdings in Russian bars.

It also remains to be seen what impact this is expected to have on the price of gold in general, given that current demand must now be satisfied via fewer refiners.

Gold last traded at $1,976.31.

Information for this briefing was found via the LBMA and the BullionStar. The author has no securities or affiliations related to this organization. Views expressed within are solely that of the author. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.