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THE LONDON BULLION MARKET ASSOCIATION

Gold–ANewLeaseofLife?

ByDavidBarclayandChristopheDuval-Kieffer,Analysts,StandardCharteredBank

Lastyear’smoneymarket disturbancesdroveleaserates
Lastyear’smoneymarket disturbancesdroveleaserates

Lastyear’smoneymarket disturbancesdroveleaserates higher,incontrasttoprevious spikes,whichtendedtostemfrom moreidiosyncraticfactors. Lease rateshavesincerecoveredfrom lastyear’stumult,butarestill relativelyhigh.Wedonotbelieve inarepeatoftheextreme conditionsinSeptemberand

October2008,thereforeinour

viewarepeatofsuchhighlease

ratesisunlikely.

Chart1illustratesthatwhilstthespikeinlease

ratesappearsasasingularevent,underlying moneymarketdisturbanceshadbeenevident

sincetheonsetofthecrisisinAugust2007.

Wetakethreedistinctperiodsandexamine

thedynamicsdrivingLIBOR,GOFOandOIS

ratesineachcase.

LeaseRatesandFinancialMarket

Distress

Theacutedistressintheglobalfinancial systemlastSeptemberandOctobercoincided

withleaseratesatlevelsnotseensince2003,

buttherehavebeenplentyofprevious occasionswhereleaserateshavespikedto evenhigherlevels. Unlikelastyear,these tendedtooccurforidiosyncraticreasons withinthegoldlendingmarketandnotdueto

broadermarketstresses;chart3illustratesthis

byshowingthattheVIX–ameasureof generalfinancialmarketvolatility–isusually notcorrelatedwithmoveshigherinlease rates. Instead,centralbankswithdrawinglending inpreparationforoutrightsales(Netherlands andBelgiumwereactivesellersinthemidto

late1990s),coupledwithnewhedging

programmesbyminersledtothetemporary spikesinlending. Theoutsizedjumpinlease

ratesin1999wasaresultoftheWashington

AgreementonGold(WAG)announcement,

whichledtofearsofdiminishedliquidityas

centralbankscommunicatedtheirintentions

Chart 1 GOFO, OIS, LIBOR and derived lease rates (all 3-month) 6.0 5.0 Period 2
Chart 1 GOFO, OIS, LIBOR and derived lease rates
(all 3-month)
6.0
5.0
Period 2
4.0
Period 3
Period 1
3.0
2.0
1.0
0.0
Jan-07
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Nov-08
Feb-09
GOFO
OIS
LIBOR
Derived lease rate

Source: Bloomberg

Chart 2 LBMA 3m derived lease rates and gold prices

10.0 1,200 1,000 8.0 800 6.0 600 4.0 400 2.0 200 0.0 0 Jan Jan
10.0
1,200
1,000
8.0
800
6.0
600
4.0
400
2.0
200
0.0
0
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
Gold price USD
Derived lease rate
Gold price
Source: Bloomberg
LEASE RATE %
GOLD PRICE USD

tosellholdingsofgoldandlimitfurther additionsofnewlending. Unliketheequitymarket,wherehigh borrowingratesreflectastockbeing“inplay”, indicatingspeculativedemandtosella securityshort,highleaseratesinthegold marketdonottendtobeareliableguidefor indicatingpricepressuresineitherdirection, aschart2illustrates. Thereseemstobeno statisticallinkagebetweenthepriceofgold andtheleaserateoverthelongrun.

IntersectingLIBOR,OISandGOFO

Rates:Periods1and2

SinceleaseratesareafunctionofLIBORand GOFOrates,weexaminebothofthesein relationtoacommonbenchmark,the overnightindexedswap(OIS)rate. TheOIS rateisafixedversusfloatinginterestrate swap,withthefloatingrateindexedtothe overnightrate,whichinthecaseoftheUS,is theFedFundsEffectiveRate(FFER). The swapratereflectsmarketexpectationsabout theaveragelevelofovernightratesovera three-monthtimeperiod. Sincethebeginningofthecrisis,GOFO rateshavebeenmorehighlycorrelatedwith LIBORratesthanwithanyotherfundingrate.

ChangesintheOISrateare,however,

uncorrelatedwithGOFOandLIBORduring

thistimeperiod.

Table1:correlationbetweenthe

changeinGOFO,OIS,LiborandRepo

3-monthrates,02/11/2007-now

 

GOFO

OIS

LIBOR

REPO

GOFO

1.00

     

OIS

0.07

1.00

   

LIBOR

0.45

0.09

1.00

 

REPO

0.05

0.31

0.11

1.00

Source:Bloomberg,BBA

 

Thevariousratesaremarkedby

differencesincounterpartyrisk(withthe

highestfirst):

l LIBORistherateatwhichbankscan

borrowfromoneanotherwithnopledgingof

collateralandanactualexchangeofnotional;

counterpartiesareexposedtothefullsizeof

thetransaction.

l TheGOFOrateinvolvesanactual

exchangeofcashforgold,leavingthe

counterpartiesexposedtothedifferencein

valueoftheunderlyingnotionals.

l TheOISrateisaswaptransactionwhere

thecounterpartyriskislimitedtothechange

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ALCHEMIST ISSUE FIFTY FOUR

Chart 3 LBMA 3m derived lease rates and gold prices 10.0 90.0 80.0 8.0 70.0
Chart 3 LBMA 3m derived lease rates and gold prices
10.0
90.0
80.0
8.0
70.0
60.0
6.0
50.0
40.0
4.0
30.0
20.0
2.0
10.0
0.0
0.0
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
Derived lease rate
VIX
Source: Bloomberg
LEASE RATE %
VIX

spread,thelinkagebetweentheGOFO-OIS premiumandCDSspreadshaslimited statisticalsignificance;itisespeciallythecase ifthepriceofgoldisaddedasanexogenous variablefortheGOFO-OISspread. This probablyreflectsgoldpricesandCDSspreads exhibitingsomecommoncomponent indicativeofriskaversion. Overall,thereisnostrongevidencethat counterpartyriskisaprominentfactor determiningGOFO-OISspreads,incontrast tothedetectedimpactonLIBOR-OIS

spreads. Therefore,theriseincreditconcerns wasafactorinopeningupthegapbetween LIBORandGOFOandtohigherleaserates.

inthemarked-to-marketvalueoftheswapand nottheprincipaltransacted. Sothecounterpartyriskelementismuch smalleronanOISswapthanonanunsecured depositreflectedinLIBORrates,sowhen counterpartyriskincreases,thespread betweenthetwotendstowiden. Historically, LIBORtendstotracktheOISratevery

closely,asseeninthefirstpartofchart1.

wereactivelymanipulatingLIBORratesina concertedfashion. Whiletheoccurrenceofsuchmanipulation remainstobeevidenced, 1 itislikelyhowever thatthespreadbetweenGOFOandLIBOR embeddedunusualfactors,suchasthe

creditworthinessofLIBORcontributorsand cashhoarding. Aseparateempiricalanalysis, takingtheaverageofthefive-yearcredit

defaultswap(CDS)spreadofLIBOR-

contributingbanksasanexplanatoryvariable fortheLIBOR-OISspread,suggeststhatpure creditworthinesswasprobablyless instrumentalindeterminingtheLIBORrisk premiumthancashhoarding,butthatit accountsforasignificantshareofthewidening spreadnonetheless. Asbankssufferedfrom deterioratingcreditworthinesstovarying degrees,therateatwhichtheycouldobtain USdollarfundingwoulddiffer,havinga knock-oneffectontheirrespectiveleaserates. Thisisbecauseleaseratesarepartlyafunction ofLIBOR,soanyspectrumincontributory

LIBORratesfromtheBBA’spanelwillalsobe manifestinleaserates. Couldthedifferingcompositionsbetween thepanelsofGOFOcontributorsandLIBOR contributorsbeasourceforvariedpressures upontherespectiverates?TheGOFOpanel hasfewercontributorsandhasalower

proportionofUSversusnon-USbanksat1:2,

whereastheLIBORpanel’sratiois1:3(see

Table2). ItisworthrecallingthatGOFOand LIBORratescoverdifferentcreditspectrums and,ingeneral,creditspreadsonUSbanks (Citibank,BoA,JPMorganChase,etc.)have

Table2:ContributingBankstoGOFO

andUSDLIBOR

GOFO

USD LIBOR

BankofNovaScotia-

BankofAmerica

ScotiaMocatta

BarclaysBank

BankofTokyo-

Mitsubishi

DeutscheBank

BarclaysBank

HSBC

Citibank

GoldmanSachs

CreditSuisse

JPMorganChase

DeutscheBank

RoyalBankofCanada

HSBC

SociétéGénérale

JPMorganChase

UBS

LloydsTSB

 

Rabobank

RoyalBankofCanada

NorinchukinBank

SociétéGénérale

RBS

UBS

Source:LBMA/BBA

WestLB

GOFO-OISSpreadsAppear

DirectionalwithGoldPrices

Indeed,factorsotherthanthecreditof contributingbanksmighthavehadanimpact onGOFOrates. Aswehaveunderlined, GOFOratesaretheinterestratesassociated withthelending/borrowingofcashagainst gold. Inaway,itissimilar–althoughnot exactly–toGeneralCollateralRepurchase Agreements(GCRepo)wherecashis borrowedagainstthepostingofsome collateral. Suchrepossometimesdependon thevalueanddemandoftheunderlying collateral. Collateralthatishighlyindemand willtypicallybeassociatedwithlowinterest ratesonthecashleg. Also,reposoffer protectionforthelenderascollateralisposted atadiscount(“haircut”);werethecash borrowertofail,thelendercoulddisposeof thecollateralwithagoodchancetobeinthe money. Bycontrastwithrepos,however,gold

versuscashswapsdonotinvolvethepostingof

Attheonsetofthecurrentcrisisinearly

August2007(markedperiod1inchart1),the

LIBOR-OISspreadmovedwider,whereasthe GOFO-OISspreadreactedtoalesserdegree,

pushingleaseratesfromarangeof5-15bps

(basispoints)upto20-30bps. Then,in

September2008,LIBOR-OISbleweven

higher(period2),andalthoughmirroringthis

moveinitially,GOFO-OISspreadsthenmoved

lower,coincidingwiththepeakin3-month

leaseratesat2.93on8October2008. This periodofhighleaserateswascharacterisedby theexplosivemovehigherinLIBOR. ThissharpmovehigherintheLIBOR-OIS spreadreflectedseveralunderlying parameters,thetwomostimportantbeingthe short-termcreditoftheborrowingbankanda pureliquidityriskpremium. Thelatter occurredatthestartofthecurrentcrisis whenbankswantedtokeeptheircashtomeet potentialliquidityback-stopobligationson somestructuredinvestmentvehicles(SIVs). LIBORbecamethefocusofintensescrutiny lastyearandsuggestionswereaboundthat bankswereunderstatingtheirtrueborrowing costsinanattempttocloaktheirdesperation forfunds. Therewereevenclaimsthatbanks

Chart 4 3m GOFO-OIS spread (bp, LHS) and gold prices (USD, RHS) 150.0 1,300 125.0
Chart 4 3m GOFO-OIS spread (bp, LHS) and
gold prices (USD, RHS)
150.0
1,300
125.0
1,200
100.0
1,100
75.0
1,000
50.0
900
25.0
800
0.0
700
-25.0
600
-50.0
500
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
GOFO-OIS
Gold
Source: Bloomberg

widenedmorethan

creditspreadson

Europeanbanks(UBS,

Barclays,HSBC,etc.).

However,by

contrast,withthe

significantexplanatory

powerofCDSspreads

fortheLIBOR-OIS

1 InaLIBORconsultationpaper,theBBAfoundthatrespondentsfromawidecross- sectionofthemarketconsideredLIBOR“afundamentallyrobustandaccurate benchmark”.However,itwasnotedthat“manyrespondentsreferredtothepoormarket conditionsashavinganadverseeffectonallbenchmarksaggravatedbytheglobal shortageofUSDollars.”

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THE LONDON BULLION MARKET ASSOCIATION

Chart 5 3m GOFO-OIS spread (LHS) and EURUSD basis swap (bp, RHS) 160.0 -350 140.0
Chart 5 3m GOFO-OIS spread (LHS) and EURUSD
basis swap (bp, RHS)
160.0
-350
140.0
-300
120.0
-250
100.0
80.0
-200
60.0
-150
40.0
20.0
-100
0.0
-50
-20.0
0
-40.0
-60.0
50
June
July
August
Sept
Oct
Nov
Dec
Jan
08
08
08
08
08
08
08
09
GOFO-OIS (lhs)
EURUSD basis swap (rhs)
Source: Bloomberg

collateral,meaningthatthecounterpartiesto theswapreceivefullownershipofthe gold/cashduringtheswap. Becausetheswap iscashagainstavolumeofgold,thepriceof goldisnotafactorintheswapperse:a volumeofgoldisborrowed,thesamevolume ofgoldisreturned. Yetthelenderofgoldmightnotrecoverits goldifthecounterpartyfails,andwillincur thefullmarked-to-marketriskofgoldifithas tousethecashtorepurchaseitsgold–there isno“haircut”. Asaresult,counterparties enteringagold-for-cashswapwillbeexposed tothepriceofgoldandalsoperhapstothe volatility–eitherrealisedorimplied–ofgold pricesintheeventofadefault. Itistherefore notsurprisingifgoldpricestendtoinfluence theGOFO-OISspread,whichasweshowed, exhibitssomedirectionalityingoldprices. Thisriskhasacost,whichshouldbe associatedwithapositivebasisbetween GOFOratesandREPOratesorOISrates. Highergoldpricesmightbeassociatedwith

higherGOFO-OISspreadsbecause:(1)higher

goldpricesillustratesomecautiousstanceon riskyassetsandthereforesomecautiononany

formofunsecuredlending;and(2)the

increaseingoldpriceshasbeensopromptand

sustainedthatanycounterpartylendinggold toafailingcounterpartywouldhaveincurred asubstantialcosttobuyitbackhaditbeen leftwithcash. Animportantfeatureofthemarketfor borrowedgoldistheroleofthecentralbanks, whichareprimarylenders. Centralbanks’ goldislenttointermediaries,whichinturn

canlenditon. Intermediariesreceivinggold

depositsfromcentralbankswillprovidehigh-

qualitycollateralinreturn–sothatthe availabilityofcollateralmightplayaroleatthe earlystagesofgold“sourcing”. Centralbanks lendgoldtoearnsomereturnontheir holdings,butalsoentergoldswapswithother monetaryauthoritiesinordertohaveaccessto alternativereserveassets. GOFOratesmight thereforebeaffectedbycross-borderfunding issues.

TheSpikeinLeaseRates:Period2

GOFO-OISspreadswerehosttosome

extrememovesinthesecondhalfof2008,the

firstofwhichoccurredfollowingtheLehman BrothersbankruptcyinmidSeptember. The

spreadreachedahighof140bpsattheendof

September,butthenbegantoease,whereas

LIBOR-OISdidnotpeakuntil10October.

Chart 6 Near dated COMEX futures minus spot prices 20.0 15.0 10.0 5.0 0.0 -5.0
Chart 6 Near dated COMEX futures minus spot prices
20.0
15.0
10.0
5.0
0.0
-5.0
Jun 07
Sep 07
Dec 07
Mar 08
Jun 08
Sep 08
Dec 08
Mar 09
1m future - spot
3m future - spot

Source: Bloomberg

page22

Theperiodbetweenthesetwodatessawlease

ratesattheir2008highs.

TheunusuallywideGOFO-OISspread throughoutSeptemberandOctoberwas contemporaneouswithasharprallyingold prices,althoughthiscannotbeseenasthe causeofthewiderGOFO-OISspread. Atthat time,fundingmarketswerehighly

dysfunctional,withhighLIBOR-OISspreads

aswell,althoughthepatternoftheLIBOR-

OISspreadcannotbeexactlymatchedwith

thatoftheGOFO-OISspread. Aboveall,

cross-borderinterbanklendingfroze,inducing

asequenceofresponses.

On24September,theFOMCestablished

newswaplineswiththeReserveBankof AustraliaandtheSverigesRiksbankforupto

US$10billioneachandwiththeDanmarks

NationalbankandtheNorgesBankforupto US$5billioneach. On26September,it increasedexistingswaplineswiththeECBby

US$10billionandtheSwissNationalBankby

US$3billion. On29September,itauthorised

aUS$330billionexpansionofswaplineswith

BankofCanada,BankofEngland,Bankof Japan,DanmarksNationalbank,ECB,Norges Bank,ReserveBankofAustralia,Sveriges Riksbank,andSwissNationalBank. Swap

linesoutstandingthentotalledUS$620billion.

On13October,itincreasedexistingswap

lineswiththeforeigncentralbanksagain. Inspiteofcentralbanks’actions,itisfair toassumethatduringthisthree-weekperiod, dollarfundingfornon-dollarbankswas difficulttoget;basisswaps(LIBORversus EURIBORcurrencyswaps)became increasinglyexpensive,anditislikelythat,at thattime,usinggoldtoobtainUSdollars becameattractive. Asaresult,itappearedthat marketparticipantswerereadytopaymuchto borrowUSdollarsusinggoldastheneedfor dollarfundingwaspressingandnoother sourcesoffundingwereavailable. Asthisneed diminished,GOFO-OISbegantomovelower, leadingtothefinalleghigherinleaseratesas LIBORpeakedsomedayslater.

Backwardation:Period3

Leaseratespartlyrecoveredto160bpsby7

November,amonthorsoafterthe290bps

high,onlytorisesharplyagainabove200bps

(period3)duringthesecondhalfofthe

month,thistimedrivensolelybyactionin GOFO,sinceLIBORwasrelativelysteadyat thistime. 3-monthGOFOratesfellaslowas

5bps(1-monthGOFOrateseventurned

negative)andGOFO-OISspreadsreached-

40bps. Duringtheresultantbackwardation, marketparticipantswerepaidtoborrow moneyusinggold–whichistheoppositeof theusualregime,whencreditorsare remunerated. Theextenttowhichnormal tradingparametersweredistortedis

illustratedinchart5above,whichshowsthe

premiumof1-monthand3-monthfutures

ALCHEMIST ISSUE FIFTY FOUR

overspotprices. Thetwo-monthcycle

observedupuntilSeptember2008reflectsthe

rollbetweenthebi-monthlyactivecontracts, ofwhichtherearesixeachyear,yetthis completelybrokedown. Importantly,GOFOrateswerelowerthan OISratesduringthisperiod;OISrateswere alreadydepressedbyexpectationsoffuture cutsintheFederalReservetargetrate,yet GOFOrateswereevenmoredepressed. It cameasasharpcontrastwiththepositive spreadthathadprevailedsincethebeginning ofthecrisis. Theanalogywithreposhelpsto explainhowthischangehappened;inarepo, collateralthatishighlyindemandwill typicallybeassociatedwithlowinterestrates onthecashleg. DuringthisperiodoflowGOFOrates,it appearsinvestorswerehappytolendcashat negativeratesinordertobenefitfromthe safetyofholdinggold;inotherwords,goldas quasi-collateralwassomuchindemandthat investorswerereadytopaytoholdit. Sucha financialoddity–the“safetypremium”–also

tookplaceonshort-termUSbills,whichon4

December2008paidnegativeinterestrates.

ThisrushtosafetypressuredGOFOlower

andresultedinaminiup-tickinleaserates

oncemore,althoughtolevelsbelowthe

Octoberhigh.

LeaseRateVolatilityShouldBe

ConfinedtothePast

Financialmarketconvulsionscommencingin

August2007radicallyalteredthenormal

relationshipsbetweenLIBOR,GOFOand OIS,whichculminatingintheepicentreofthe

crisisinSeptemberandOctober2008,

resultedinleaseratesspikingtolevelsnot seensince2002. Sincethen,notwithstanding thenumerouspolicy-inducedwavesof

volatilityandoccasionalboutofextremerisk-

aversion,leaserateshavetrendedbacklower

andarenowatpre-September2008levels.

Webelieveleaserateswillfirststayat

theselevelsandthengraduallyeaselower

oncemore:

l Elevatedconcernsregardingthe creditworthinessofcounterpartsinthe interbanklendingmarkethadvaryingimpacts onLIBORandGOFO;webelievearepeatof theseconditionsisunlikelyinlightofthe

ChristopheDuval-

Kiefferreceived

economicsandfinance

degreesfromHECand

IEPParisinFranceas

wellasfromPompeu

FabraUniversityin

Spain.

IEPParisinFranceas wellasfromPompeu FabraUniversityin Spain. Hisexpertiseincludestheuseof

Hisexpertiseincludestheuseof

modellingtoolsandstatisticalbacktesting

tocreatefixed-income,FXandcommodity

tradingstrategies.

multitudeofpolicymeasuresenactedto enhanceliquidityprovision.

l Themajorcatalystfortheseinterbank concernswastheLehmanBrothers bankruptcyanditappearsunlikelyfornow thattheUSauthoritieswillallowanother systemicallyimportantinstitutiontofail.

l Negative1-monthGOFOratesandthe

resultantbackwardation,relatedtothe similarlyodd“safetypremium”thatbefellthe bondmarkets,isarareevent. Thepositive relationshipbetweenGOFO-OISspreadsand

goldpricesexhibitedsince2001shouldbuoy

GOFOratesinlightofouroutlookforhigher goldpricesoverthelongerterm. Intheabsenceofanyfurtherlargecredit eventsinthebankingsector,wethinklease rateswilltrendlowerasLIBORslowly normalises. n

DavidBarclay

receivedaBScin

Business

Administrationfrom

theUniversityof

Bathandjoined

LehmanBrothersas

partofthecapital

marketsgraduateprogramme.Hethen

movedintometalsresearch,covering

uraniumandsteel,beforejoiningStandard

Charteredasacommoditiesstrategist.

Charteredasacommoditiesstrategist. ObituaryJACKSPALL Honour,Integrity,Respect and Liquidity

ObituaryJACKSPALL

Honour,Integrity,Respect and Liquidity

ObituaryJACKSPALL Honour,Integrity,Respect and Liquidity Asabosshewas“hardbutfair!” Notoneto

Asabosshewas“hardbutfair!” Notoneto sufferfoolsgladly,his“correctiveinterviews”with erringdealerswhohadraisedhisirebecame legend,althoughhedid,rumourhasit,havea softerunderside. Hewasalsoonetoletthe dealershavetheirheadsandmaketheirown mistakes,butnottoooften! Hisgreatestobsession wasundoubtedlyliquidity:“Neverbeinaposition whereyoucan’tsatisfyyourcreditorsandsoput thefirmatrisk.” Hisapproachhasperhapsgone outofvogue,tothedetrimentofallofustoday! InhiscareerJackdealtonthebasisofhonour, integrityandrespect. Happytoworkonthebasis of“mywordismybond”andofasetofrulesfor themarketthatcouldbecontainedononepieceof paper. Thenecessityoftheintroductionofvasttomesofregulations

withthepassingoftheFinancialServicesActin1986lefthimhappy

toleavethemarketwhenhedid,foritwaschangingmorethanhe caredfor. Hewouldalsonothavebeenonefortheelectronictrading oftoday,forhecamefromatimewhendailypersonalcontactwasthe normandherevelledinit. JackleaveshiswifeKay,hischildrenJonathanandClaireandfour grandchildren. IthasbeenasourceofgreatprideforJackthat Jonathanfollowedinhisfather’sfootsteps,helpingtokeephimin touchwithapartofhislifethathadbecomesoimportanttohim. n

ByAlanBaker

JackSpallstartedhiscareerintheCityin1947at

WallaceBrothers,becomingasoftcommodities broker,primarilyinwool,beforemovingto

MerrillLynchin1961.

Hisintroductiontothebullionmarketcame

in1967withtheterminationofsalesofsilverby

theUSTreasuryat$1.29perounce. Itwasthen thatheswitchedfrombrokinginwooltosilver, atthebirthoftheeraofspeculativeopportunities inbullion. Thisbroughthimincontactwith Londonbullionhousesbyprovidingthelinktoarbitrageagainstthe fledglingsilvercontractonCOMEX,followedbyaninvitationtojoin

SharpsPixleyin1970,whereheremaineduntilheretiredin1988.

Jack’searlyexposuretosilverarbitragelefthimwellplacedto steerSharps,takingadvantageofopportunitiesontheWinnipeg

CommoditiesExchangewhenitopeneditsgoldcontractin1972,

HongKongwhenimportandtradingrestrictionswereliftedin1974

andtheopeningoftheCOMEXgoldcontractin1975. Themovealso introducedhimtotheinstitutionandcamaraderiethatistheLondon BullionMarket,somethingforwhichhisnaturalconvivialitywas eminentlysuited.

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