The world’s oldest gold trader, ScotiaMocatta, went on sale on Wednesday. ScotiaMocatta has roots dating back to the 17th century. T the decision stems from a scandal that has shocked the global bullion market. Scotiabank bought Mocatta Bullion in 1997. It has been around since 1671.
Money Laundering Charges
News outlets have been following the massive money laundering charges that have come to light. Additionally, this will most certainly have a huge effect on some of the biggest players in the business. The Canada Bank of Nova Scotia has been testing the waters on finding a buyer for its gold business- ScotiaMocatta.
This money-laundering story– that a US refinery was part of the smuggling of gold from South America– has dramatically affected many. Furthermore, it has left the future of ScotiaMocatta very uncertain over the past few months. Scotiabank may even have been searching for a buyer for close to a year. It has been decreasing its business in case a sale doesn’t go through soon. JPMorgan was in charge of the sale of this mainstay in precious metals trading. They seem to be eyeing China as a potential buyer at this time.
March sealed this sale when Scotiabank made a loan to Elemental. Elemental is a refinery in Texas and set itself apart as one of their biggest lenders. US prosecutors subsequently accused NTR Metals, a subsidiary of Elemental, of laundering billions of dollars of criminal gold. Most of this came from Peru. Hence, the seal of Scotiabank’s fate.
This story has garnered a lot of interest. It has slightly surreal aspects like the fact that this Elemental subsidiary allegedly imported more than 3.6 billion dollars of gold. This was from Latin America in the four years from 2012 to 2015. Two men involved, Samer Barrage and Juan Granda, pled guilty in September to money laundering plea deals. Following this, the London Bullion Market Association’s “Good Delivery List” of gold refiners got rid of Elemental.
Coming back from being removed from this list is hard. Gold buyers tend to only buy gold from those that are part of it. Shortly after Elemental left, the Comex futures exchange in New York announced that it would no longer accept gold from Elemental for delivery against futures contracts.
This announcement along with the rising tide of scandal made it impossible for those with Elemental gold to sell their gold bars. It left gold stuck in banks, stated traders in the Financial Times. Buyers are also hesitant to take on any of this gold. Because of this, hundreds of millions of dollars in loans given to Elemental from ScotiaMocatta are in limbo. Additionally, one of the five bullion banks that work in gold with the largest market, London, has been blackballed.
HSBC and JPMorgan
HSBC and JPMorgan are prepared to step into Mocatta’s empty spot on the London market. They can provide credit to clients and refiners worldwide. They also offer an additional benefit that Scotiabank could not, which are their London vaults. The London gold market is at approximately 5 trillion dollars a year. Although, no exact number of how much gold is traded daily is available.
Scotiabank has the most significant foreign presence of any Canadian bank. It is currently looking towards the Pacific Alliance, a Latin American trade bloc. The Pacific Alliance is Mexico, Peru, Chile, and Colombia. For now, it will continue to look for a Chinese buyer for this compromised gold trading operation.