Global Overview of Precious Metal Logistics
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 EU and USA. From a gold pricing perspective, the biggest single issue has been the disparity between the price of gold in London and in New York. There are many theories about what lies behind this.
One event that occurred in the physical market at the time is disparity occurred was the short-term closure of 3 of the 4 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 traditionally are utilised for the movement of valuables such as gold. In the UK Gatwick is closed and Heathrow is operating at 33% of its “normal” capacity, Changi Airport in Singapore has seen a drop-in excess of 50% in passenger footfall. To the outsider the immediate conclusion was that this would restrict the ability of Secure Logistics Provider like Malca-Amit to facilitate the global movement of stocks. This assessment was naïve and ill informed.
The reduction in passengers 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 some freight rate prices from the airlines increasing by over 400%. BUT the space can still be secured which means the decision to move gold becomes a simple profitability test. Can the logistics costs be reasonably absorbed by the gain or by preventing the loss at the final stage of the deal? This in turn becomes a decision for our customer. Malca-Amit has fulfilled EVERY transportation requested during this period and its precious metals departments have had their busiest month for a number or years.
Malca-Amit have also adapted its operation to maintain a service that works for our customers. The use of Cargo Freighters has been necessary and working with the airlines Malca-Amit have been able to provide the correct level of security and control to permit some limited use of these assets. Charter of full aircraft has always been a solution in the Valuable Logistics world, normally reserved for exceptional movements or in remote areas, 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 2 months have demonstrated is that the Logistics Providers are able to keep pace with a changing environment and as long as there is a global physical market, their contribution is critical.
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 3 PL solutions are offering our customers the ability to operate while keeping their facilities closed or at minimum manning.
As a transporter who supports the world financial markets Malca-Amit staff are classed as “Key Workers” and our teams are able to operate, with the correct and safe COVID 19 procedures, 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? Like you we are unsure. 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 about is that Malca-Amit will be there with our customers every step of the way, adapting, solving, reassuring and delivering absolute peace of mind.
Allan Finn is the Director of Global Commodities Malca-Amit, a storage and logistics company specializing in precious metals, jewelry, fine art. He has been with Malca-Amit for a decade and has a total of over 15 years of logistics experience.