The World Gold Council (WGC) is studying the creation of a global standard for gold kilobars so they can be deployed as collateral in futures markets and potentially encourage demand, sources close to the matter said.
Kilobars —1 kg gold bars — dominate Asian trade but a lack of transparency about their origin and the absence of a global standard hinders their use on exchanges elsewhere.
Clearing houses, some of which allow bullion to be used as collateral on futures markets, might accept such bars if they all met a set of internationally recognised criteria.
London Metal Exchange clearing arm LME Clear cannot accept the kilobars used in Asia because they differ from London Good Delivery standard bars, typically around 400 ounces, as specified by the London Bullion Market Association (LBMA).
Independent of the WGC initiative, the LME has been looking at accepting kilobars as collateral for all its contracts which include copper, aluminium and zinc, sources familiar with the matter said.
The council and the LME declined to comment. Intercontinental Exchange’s ICE Clear Europe and CME Group’s U.S.-based clearing house accept bullion as collateral, but only if it conforms with LBMA criteria, which typically would rule out bullion traded in Asia.
“We continuously evaluate new forms of collateral based on client demand and at this time, we haven’t heard interest from clients,” CME said when asked whether the exchange was considering accepting kilobars.
ICE declined to comment when asked.
WGC talks on creating a global kilobar standard would aim to include companies from the world of gold refining, banks and brokers that trade the precious metal in the futures and physical markets and the LBMA.
The LBMA said it was not currently involved in any specific discussions over the creation of a new standard.
‘For global acceptance’
“The plan is to create a standard for kilobars that can be adopted around the world, delivered anywhere, possibly using blockchain to identify the bars, their origins,” a physical gold trading source said. “Rigid standards and blockchain would bring in people who are worried they could be getting conflict metal,” he said.
