HSBC had $200m one-day loss in choppy gold markets
By Sean Farrell
Date: Wednesday 13 May 2020
(Sharecast News) - HSBC lost about $200m in a single day in March because of disruptions in the gold market that caused prices in major markets to diverge widely.
The bank revealed the mark-to-market loss in a filing about its risk management activities. In the document it blamed the loss on "the unprecedented widening of the gold exchange-for-physical basis, reflecting Covid-19-related challenges in gold refining and transportation".
The market for gold became volatile in March as investors sought safety when the Covid-19 crisis erupted while lockdowns shut mines and transport routes for delivery. This led to market makers and exchanges struggling to price the haven metal.
The price of gold futures in New York and spot gold in London, which usually run close to each other, diverged by up to $70 an ounce in March. HSBC's loss in late March was unusually big for a market in which leading banks might look to make about $200m for a full year, according to Bloomberg, which first reported the loss.
Some banks have stopped switching trading between London and New York. Canada's Bank of Nova Scotia is shuttering its precious metals division, Bloomberg said.
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