FX.co ★ London Metal Exchange exits gold and silver market

The London Metal Exchange has announced it would scrap its gold and silver futures by July 2022. However, this move, which was announced on Friday, is unlikely to influence the precious metals market significantly. The contracts, which were launched in 2017 with the backing of Goldman Sachs Group Inc and Morgan Stanley, will be discontinued on July 11, 2022 due to low levels of trading activity.

Although the LME had some success in the bullion market early on, its trading activity sharply dropped after Societe Generale SA had closed a significant part of its commodity trading branch in 2019. Furthermore, the exchange faced significant competition from CME Group in North America and the Shanghai Gold Exchange in China. London is one of the biggest gold trading hubs in the world. However, most bullion trading is carried out in over-the-counter markets.

The LME's decision was not a big surprise to analysts, who do not expect it to affect the global precious metals supply. However, it could severely impact the London Metal Exchange, which has been struggling due to the situation in the nickel market.

In March, a nickel short squeeze caused a massive price spike, pushing other companies to increase their margin. As a result, the LME, facing a lack of funds, suspended nickel trading for several days. The exchange's decision to shut down trading was highly controversial.

Nickel trading at the LME has not recovered since the breakdown. The trading volume of benchmark 3-month LME futures has fallen to the lowest level in more than a decade.