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An Inside Look at the World’s Biggest Paper Gold Market

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Every day, there are a whopping 5,500 tonnes ($212 billion) of gold traded in London, making it the largest wholesale and over-the-counter (OTC) market for gold in the world.

To put that in perspective, more gold is traded in London each day than what is stored at Fort Knox (4,176 tonnes). On a higher volume day, amounts closer to total U.S. gold reserves (8,133.5 tonnes) can change hands.

How is this possible?

The infographic below tells the story about gold’s foremost trading hub, as well as the paper gold market in London, England:

Gold's Secretive Price Discovery Market: Inside London's Vaults

Image courtesy of: BullionStar

London is dominant in global price discovery for gold.

In 2015, it accounted for roughly 88% of gold trade – most of which occurs between banks on behalf of their clients. Further, 90% of London trade is spot trading, which further emphasizes London’s importance in price discovery for gold markets.

While the high-level details of the market are visible, the individual mechanisms behind the London gold trade are less clear. There is very little detailed information provided on physical shipments, outstanding gold deposits or loans, allocated or unallocated gold, or clientele types. Trade reporting also breaks down at a more granular level, and datasets on the GOFO (Gold Forward Offered Rate) were also discontinued in January, 2015.

Almost all gold (95%) traded in London is unallocated and without legal title. This makes it easier to trade, but it also raises concerns about a market that is opaque to begin with. There are 5,500 tonnes of paper gold exchanging hands on paper each day, but there are only 300 tonnes of gold vaulted in London outside of the reserves for ETFs or the Bank of England.

What would happen if there was ever even a small rush to get the physical asset behind the paper? Is there a system in place for such an event, and how does it work?

Original graphic by: BullionStar

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Copper

Brass Rods: The Secure Choice

This graphic shows why brass rods are the secure choice for precision-machined and forged parts.

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Teaser of bar chart and pie chart highlighting three ways brass rods empower manufacturers in the competitive market for precision-machined and forged products.

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The following content is sponsored by Copper Development Association

Brass Rods: The Secure Choice

The unique combination of machinability and recyclability makes brass rods the secure choice for manufacturers seeking future-proof raw material solutions.

This infographic, from the Copper Development Association, shows three ways brass rods give manufacturers greater control and a license to grow in the competitive market for precision-machined and forged products.

Future-Proof Investments in New Machine Tools

A material’s machinability directly impacts machine throughput, which typically has the largest impact on machine shop profitability.

The high-speed machining capabilities of brass rods maximize machine tool performance, allowing manufacturers to run the material faster and longer without sacrificing tool life, chip formation, or surface quality.

The high machining efficiency of brass leads to reduced per-part costs, quicker return on investment (ROI) for new machine tools, and expanded production capacity for new projects.

Supply Security Through Closed Loop Recycling

Brass, like its parent element copper, can be infinitely recycled. 

In 2022, brass- and wire-rod mills accounted for the majority of the 830,000 tonnes of copper recycled from scrap in the United States.

Given that scrap ratios for machined parts typically range from 60-70% by weight, producing mills benefit from a secure and steady supply of clean scrap returned directly from customers, which is recycled to create new brass rods.

The high residual value of brass scrap creates a strong recycling incentive. Scrap buy back programs give manufacturers greater control over raw material net costs as scrap value is often factored into supplier purchase agreements.

Next Generation Alloys for a Lead-Free Future

Increasingly stringent global regulations continue to pressure manufacturers to minimize the use of materials containing trace amounts of lead and other harmful impurities.

The latest generation of brass-rod alloys is engineered to meet the most demanding criteria for lead leaching in drinking water and other sensitive applications.

Seven brass-rod alloys passed rigorous testing to become the only ‘Acceptable Materials’ against lower lead leaching criteria recently adopted in the national U.S. drinking water quality standard, NSF 61.

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Learn more about the advantages of brass rods solutions.

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