Precious Metals Derivatives: Three Years of Contraction and Concentration

By Reg Howe

On November 16, 2010, the Bank for International Settlements released its regular semi-annual report on the over-the-counter derivatives of major banks and dealers in the G-10 countries and Switzerland for the period ending June 30, 2010, together with its triennial survey on the OTC derivatives of a wider universe of “non-regular reporters” from nearly 50 jurisdictions.

As detailed in table 22A of the regular report, notional amounts of gold forwards and swaps increased from $201 to $224 billion, while options fell from $222 to $193 billion. Converted to metric tonnes at period-end gold prices, total gold derivatives, which had fallen by over 2200 tonnes in the preceding six months, declined by another almost 1500 tonnes (from 11,918 to 10,426). Again, most of this decline — over 1400 tonnes — took place in options, which fell from 6255 to 4826 tonnes. Forwards and swaps held relatively stable, dropping by just over 60 tonnes (from 5663 to 5601).

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