Global Overview of Precious Metal LogisticsBy Allan Finn, Director of Global Commodities, Malca-Amit
There has been a great deal of excitement around physical stocks of gold and their geographic location since the spread of Covid-19 to the European Union and the United States. From a gold pricing perspective, the biggest single issue has been the disparity between the price of gold in London and New York. There are many theories about what lies behind this.
One event that occurred in the physical market at the time this disparity occurred was the closure of three of the four major Swiss gold refineries, based in the south of Switzerland, and close to the heavily impacted parts of Italy. These closures were short-term and all refineries are now operating and busy.
The second reported factor was the significant drop in passenger aircraft flights, which are traditionally utilised for the movement of valuables such as gold. In the United Kingdom, Gatwick is closed and Heathrow is operating at 33% of its “normal” capacity, while Changi Airport in Singapore has seen a fall in passenger footfall of more than 50%. To the outsider, the immediate conclusion was that this would restrict the ability of secure logistics providers to facilitate the global movement of stocks. This assessment was naïve and ill-informed.
The reduction in passenger air travel has put a squeeze on space, and competition for that space between the various types of cargo that normally utilise it has become fierce with freight prices on some airlines increasing by over 400%. But space can still be secured, which means the decision to move gold becomes a simple profitability test. Can higher logistics costs be reasonably absorbed by potential profits, or by preventing the loss at the final stage of the deal? This, in turn, becomes a decision for our customers to make. Malca-Amit has fulfilled all transportation requests so far during this period and our precious metals departments have had their busiest month in years.
Malca-Amit has also adapted operations to maintain a service that works for our customers. The use of cargo freighters has been necessary and working with the airlines, the company has been able to provide the right level of security to permit some limited use of these assets. The charter of full aircraft has always been a solution in the valuable logistics world, normally reserved for exceptional movements or use in remote areas, and this mode of movement has been utilised on standard lanes where passenger or freighter solutions were unable to provide the necessary capacity.
There is much debate about the immediate future of the aviation industry but what the past two months have demonstrated is that logistics providers can keep pace with a changing environment and as long as there is a global physical market, their contribution is critical.
Our vaulting and safety deposit box network has seen a huge spike in demand as companies look for business continuity solutions or to take short-term advantage in geographical areas where they currently don’t have a capability. Our third-party logistics solutions allow our customers to continue to operate while keeping their facilities closed or at minimum manning.
As a transporter that supports the global financial market, Malca-Amit staff are considered key workers, and our teams are able to operate with the correct and safe Covid-19 prevention measures throughout this crisis. They have worked tirelessly to support our customers and maintain the credibility of the precious metals markets and innovate daily to solve issues for our customers.
What does the future hold? There will no doubt be a swing back to Asia for flows of precious metals as the current opportunities are met. The post-Covid-19 precious metals world might even see a London Deliverable Kilobar market, who knows? In the short and medium term, it is clear the world will be a little different and will pose new challenges. What we are sure of is that Malca-Amit will be there with our customers every step of the way, adapting, solving, reassuring and delivering absolute peace of mind.
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