How does the gold spot delay settlement trade develop?

Gold trading

Although it is still in the exploratory stage in China, gold spot deferred settlement has a long history in the world. The delayed settlement of gold spot almost appears and develops at the same time with the large-scale production of gold.

In the early 19th century, South Africa was the largest gold producer and London was the largest gold trading place. After the gold produced in South Africa was transported to the UK, it was resold to all parts of the world by the major gold banks and gold banks (commercial banks) in London. Like other commodities, gold producers sign purchase and sale contracts with gold banks and gold banks, then organize production, logistics, delivery and complete transactions.

Unlike other commodities, gold is highly valued and its price fluctuates sharply. Failure to deliver on time has a significant impact on the profits of gold banks. At the beginning of the 19th century, due to the limitation of technical level, there was great uncertainty in exploration, mining, refining, transportation and other links. The failure to deliver goods on time was an objective existence, which could not be completely avoided. Therefore, the method of high fine for ordinary commodities could not be accepted by gold enterprises.

The final result of the game between gold enterprises and gold banks in terms of on-time delivery is the "gold purchase and sale deferred contract", which is different from other general commodity contracts. According to the deferred contract, gold producers can deliver at any time within an agreed period of time. The enterprise has no obligation to deliver immediately on a specific maturity date. The time limit for gold bank to allow delivery delay depends on the effective mining period of the deposit, the production performance of the enterprise and the logistics security. However, in the deferred period, the interest shall be calculated continuously according to the gold lease rate on the date of expiration of the contract. This kind of contract is more flexible for manufacturers. Especially when the output is uncertain in the first few months after the mine is put into operation, enterprises prefer to sign such contracts. At the same time, the gold bank will not suffer losses due to the delay of delivery because the gold enterprises pay the interest on the gold lease. Therefore, this kind of "gold purchase and sale deferred contract" became popular in the early 19th century. This kind of "gold purchase and sale deferred contract" is the predecessor of the current gold spot deferred settlement transaction.

"Gold purchase and sale deferred contract" solves the contradiction of "not on time", but the promise of "delivery" has not changed. In the mid-20th century, gold ushered in a big bull market. After "deferring", gold production enterprises find that the market price has far exceeded the original contract price. It is a very painful thing to deliver according to the contract price. Therefore, we hope to loosen the promise of "delivery" in the contract. The result of the game between gold enterprises and gold banks is the birth of "gold can be postponed trading". It is stipulated that: on the expiration date of forward transaction, gold enterprises can choose to perform the contract and hand over gold according to the contract price; they can also choose not to perform the contract and sell directly in the spot market, and the unperformed forward transaction contract will be postponed after being revised by both parties. Follow this procedure when the newly revised contract expires. This kind of forward sale method, which can be revised and rolled continuously, is called "gold postponeable trading". Because the price has to be revised every time, and the time span is very long, it can be considered to be similar to the promise of exempting "delivery". Through "gold can postpone trading", gold enterprises can deliver goods at any time or not within 15 years. By standardizing this kind of "postponeable trading of gold", we have formed the "postponement trading of spot gold" which is widely used in the world. The name sounds a little strange. In fact, it has a long history in the international gold spot market.

The reason why "gold can be postponed trading" is unfamiliar in China is that before 2001, the policy of "unified marketing and distribution" was implemented in China, which has nothing to do with the market. It was not until August 3, 2010 when the "opinions on promoting the development of gold market" was issued that gold really entered the track of market development in China.

As a kind of commodity, gold has gone down the shrine. Gold, as a special commodity, has been cultivated by the market, and its special trading methods, including "deferred settlement trading", are well known to the world.

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