In this revealing conversation, David Jensen lifts the veil on the London Bullion Market Association (LBMA), an institution shrouded in secrecy that plays a central role in the global gold market.
🗣️ “The LBMA is not a government institution. It is a privately run club.”
Understanding the LBMA’s Role in the Gold Market
🏦 Origins: From Thatcher’s Big Bang to a Paper Gold Empire
The LBMA was created after the UK’s 1986 “Big Bang” reforms to liberalize financial markets.
Oversight was handed to the Bank of England, which, with help from the Rothschilds, set voluntary rules for trading unallocated spot contracts — digital claims rather than physical bars.
This turned gold from something mined and vaulted into something typed into existence.
“They didn’t need to dig gold out of the ground — they could just create contracts and sell them.”
đź“Š A Market of Claims, Not Metal
In 2011, the LBMA’s liquidity survey revealed that daily gold turnover was around 260 million ounces — over three times global annual production and roughly equal to all U.S. gold reserves.
The vast bulk of these trades were unallocated spot contracts: digital IOUs, not real gold.
For silver, while official data wasn’t released, similar scale was likely — implying billions of ounces traded daily.
🔍 The Numbers Don’t Add Up
In recent years, LBMA data shows the ratio of gross to net trading volumes dropping sharply — from ~10× in 2011 to around 3× now.
Despite a global surge in derivatives and record demand, reported gross volumes have collapsed by ~85%.
Yet other indicators (like OCC derivatives data) suggest trading has actually increased.
“It doesn’t make sense — the market should be busier than ever, but reported numbers show the opposite.”
🧰 The Black Box: Who Really Runs the Market?
At the heart of the LBMA system is the London Precious Metals Clearing Limited (LPMCL), owned by four banks:
- HSBC
- ICBC (China)
- J.P. Morgan
- UBS
They control the Aurum digital trading platform, which:
- Matches trades privately
- Publishes prices and volumes without external verification
- Leaves no way to audit real vs. paper gold
“It’s not just opaque — it’s structurally unaccountable.”
🌏 Global Dominance — and Global Risk
The LBMA still sets the price for over 95% of global gold spot trading.
By comparison, Shanghai’s physical market is tiny — just 1/160th the daily volume.
This means a few banks effectively shape gold and silver prices worldwide — even as real demand diverges from paper supply.
🧨 Platinum & Palladium: Tighter Markets, Bigger Risks
Daily trading of platinum and palladium is multiples of global production.
Lease rates hit 25%, a sign of severe physical shortage.
Jensen warns that a supply squeeze here could cascade into gold and silver, triggering wider market disruption.
đź”® The Endgame: Metal Reclaims Its Role as Money
- Fiat revulsion as trust erodes
- Demands for physical settlement in gold and silver, not paper contracts
- A shift from black‑box pricing to metal‑backed trade settlement
“Gold won’t trade against dollars — dollars will trade against gold.”
âś… Final Thought
What began as a trusted gold market has become a digital casino run by four banks — and when faith in paper fails, only real metal will matter.
đź’ˇ Ready to explore alternative asset strategies? Talk directly with George at Time Health Capital.
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