The LBMA House of Cards. A Privately Run and Opaque Black Box Market | David Jensen

📢 About This Summary

Summary based on David Jensen’s discussion about the LBMA (London Bullion Market Association) — edited and annotated by Time Health Capital. Our team watches, distills, and reacts to leading content so you can read the key points quickly and consider implications.

“The LBMA is not a government institution. It is a privately run club.” — David Jensen

Source / Watch: David Jensen — From Thatcher’s Big Bang to a Paper Gold Empire (YouTube)

📝 Summary of Key Points (from David Jensen)

Jensen outlines how the LBMA evolved after the 1986 “Big Bang” into a market dominated by large banks and digital claims (unallocated contracts), rather than physical metal. A small group of clearing banks and the Aurum matching/clearing platform control price publication and trade matching with limited external auditability. Reported volumes and public metrics appear inconsistent with other market indicators — suggesting a wide gap between paper trading activity and available physical metal. Jensen warns that this asymmetry creates systemic risks should demand for physical settlement spike.

🏦 Origins: From Thatcher’s Big Bang to a Paper Gold Empire

After the UK’s 1986 “Big Bang” reforms, London liberalized its financial markets. The LBMA and related structures were shaped in that environment: voluntary rules, private clearing, and a shift toward unallocated trading. Over time this allowed gold to be widely traded as digital claims — contracts and ledger entries — rather than strictly as vaulted physical bars.

📊 A Market of Claims, Not Metal

Jensen highlights startling turnover figures from past LBMA surveys (e.g., 2011), when daily gold turnover vastly exceeded annual mine production — a hint that much of the market is trading claims, not physical metal. Unallocated contracts, leased metal, and derivatives create a structure where paper flows can dwarf the tangible stock of bullion.

🔍 The Numbers Don’t Add Up

Official LBMA-reported metrics show declining gross volumes in recent years even as other sources (exchange and derivatives data) indicate rising activity. Jensen points out that the ratio of gross to net volumes has shifted dramatically and that published figures have become harder to reconcile — a red flag for anyone trying to assess real market depth or physical availability.

“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 core is LPMCL (London Precious Metals Clearing Limited) and a handful of large banks (HSBC, ICBC, J.P. Morgan, UBS) that dominate clearing and the Aurum matching platform. Trades are matched privately and price publication lacks independent verification — a structural opacity that concentrates influence among a few institutions.

🌏 Global Dominance — and Global Risk

The LBMA remains the price-setting center for most global spot trading. That concentration of price discovery and liquidity means structural problems in London can have outsized global effects — especially if physical demand (for coin, bar, or ETF settlement) diverges from paper positions.

🧨 Platinum & Palladium: Tighter Markets, Bigger Risks

Jensen notes even more acute imbalance in platinum and palladium markets, where lease rates and scarcity metrics signal physical tightness. A squeeze in these metals could ripple into broader precious-metals markets if counterparties are forced to deliver metal they don’t hold.

🔮 The Endgame: Metal Reclaims Its Role as Money

Jensen argues that a loss of confidence in paper claims could force a regime shift — toward demand for physical settlement and a re-centering of markets around tangible bullion. In that scenario, price discovery would reflect metal scarcity, not just ledger balances.

“Gold won’t trade against dollars — dollars will trade against gold.”

💬 Dr. Ozoude’s Commentary

Jensen’s walkthrough is an important reminder: markets are social constructs — they require transparency and trust. When a handful of institutions control matching, clearing, and price publication without clear external audit, that trust becomes fragile. For investors and clinicians who value tangible security, the practical implication is simple: understand counterparty exposure and favor real, deliverable assets when your goal is preservation of purchasing power. In practice that means evaluating where your metal is stored, insisting on allocated holdings if physical exposure matters to you, and treating paper proxies (claims, large unallocated positions) as different instruments with different risks. Systems built on convenience can work — until they don’t. Jensen’s account underscores why clarity, settlement rights, and auditability should matter to anyone holding precious metals.

Dr. Ozoude

Physician & Founder, Time Health Capital

❓ Questions & Implications for Our Readers

• Do you own allocated (fully segregated) metal or paper claims? If not, do you understand the counterparty risks?
• How would your portfolio behave if physical settlement demand outpaced paper liquidity?
• For clinicians and high-net-worth individuals: should part of your insurance sleeve include deliverable precious metals as a diversification and insurance play?

▶ Prefer to Watch?

Watch the full discussion that inspired this summary:

David Jensen — From Thatcher’s Big Bang to a Paper Gold Empire (YouTube)