The effectiveness of the London Bullion Market Association's Good Delivery List was questioned during a panel session Tuesday at the annual LBMA/LPPM conference in Barcelona.
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One topic of conversation from the refiners represented on the panel was the fact that the LBMA's GDL might be overpopulated, and that this was creating a "two-tier" system, one that actually delivered material to the market and another that was simply leveraging the LBMA brand and associated "black box" value-added tax break.
On the LBMA website the GDL is described as, "only refiners whose bars have been accredited by the LBMA as meeting the minimum standards for trading on the London market appear in the list."
Perth Mint CEO Richard Hayes, Valcambi CEO Michael Mesaric, Asahi President Grant Angwin, and MKS South Africa Chairman Marwan Shakarchi all agreed that the LBMA needed to have a plan and agenda to maintain the credibility of the global gold market as well as its own reputation.
"You're setting the standard and people should follow this," Shakarchi said.
The LBMA, traditionally a trade body, is becoming much more of the "standard setter," or proxy regulator, CEO Ruth Crowell said Monday.
Hayes said that in a globalized world the issue of overcapacity was less of a problem than the fact that moving metal around was becoming easier and auditing it back to source more complicated.
He said of the GDL that all members should be forced to deliver a standardized amount of refined gold a year to market to prove authenticity.
One sticking point was that of kilobars, Hayes arguing that he believes they should be allowed to be registered as good delivery.
However, Angwin said that kilobars should remain a "premium product" and that the London market, formalized to 400 oz, was more for central banks.
Hayes, however, said that kilobars -- favored by China, and the Shanghai Gold Exchange -- not being included in the list was "at odds" with the fact that most major refiners produce large bars [kilos].
Valcambi's Mesaric said that delivering large bars should be a choice because there was a potential loss of margin if the kilobar ceased to be a premium product, and this in the face of an already highly competitive business.
On the sidelines of the conference global refiners told S&P Global Platts that the physical business was "tough" and facing "major challenges, and changes."
The main conclusion from all the refiners on the panel was that the LBMA needs to work hard to maintain the overall influence and brand of the delivery list.