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By Peter Hobson
LONDON, April 7 (Reuters) - Gold stocks held in New York
vaults registered with CME Group have jumped almost 50%
since the end of last week after the exchange launched a new
contract and a price premium since the outbreak of the
coronavirus encouraged stockpiling.
The premium on CME's Comex exchange over spot gold traded in
London rose sharply again on Tuesday as supply routes remained
partially closed and banks and brokers wary of the price gap
reduced trading.
CME said late on Monday that gold stocks in Comex-registered
vaults totalled 15.9 million ounces, a record high and their
highest level since ever and worth around $26 billion.
Of the new arrivals, 4.8 million ounces were 400-ounce bars
of the type used in London, which cannot be delivered against
Comex's main gold futures but are eligible for new contracts
launched on Monday to address the supply concerns.
Gold futures on Comex leaped above London spot prices two
weeks ago after coronavirus control measures grounded passenger
airlines on which gold usually shipped and closed several major
precious metals refineries.
Traders feared it would be impossible to ship gold from
London, a major storage centre, to settle contract obligations
in New York, where much more gold trades than is stored.
Adding to the difficulty, Comex's main gold futures run on
100-ounce bars, meaning 400-ounce bars from London must be
melted down and recast, usually in Switzerland, before shipping
to New York.
Higher prices create an incentive to move metal, and the
stockpile in Comex-registered vaults has surged from 11 million
ounces at the end of last week and less than 9 million ounces
two weeks ago, CME data showed.
But worries over settlement of the existing futures persist,
despite CME saying it will offer instruments to link it with its
new contract.
The premium for the most-traded June contract rose to
$50 - or 3% - above London spot gold from around $25 in
recent days.
There are currently 357,369 of these contracts active
representing 35.7 million ounces of gold for delivery in June.
"Capacity in the market is massively lower and risk appetite
is massively lower," said a source at a gold-trading bank in
London.
More gold was on its way to New York and Comex stocks would
continue to rise, they said. Traders also said the partial
reopening of several Swiss refiners this week would increase
supply.
Investors on Comex typically do not take delivery of gold,
using the exchange instead to gain exposure to gold prices and
rolling their positions forward to future months.
Of around 200,000 contracts for April delivery active on
March 23, when prices on Comex began to rise sharply above spot
gold, around 25,000 equivalent to 2.5 million ounces have been
taken to delivery, according to CME data.
(Reporting by Peter Hobson. Editing by Jane Merriman and Susan
Fenton)