JP Morgan announced today that from now on they will accept physical gold bullion as collateral. This is a sign of gold’s further remonetisation in the global financial and monetary system. It may signal that JP Morgan is having difficulty in securing gold bullion in volume. JP Morgan is the custodian for many of the gold and silver exchange traded funds. They will not accept ETF trust gold as collateral.
In October, the clearing house of global exchange CME Group – CME Clearing – announced it will now accept gold as collateral for trades on the exchange. Gold bullion can be used for margins for CME trades, ranging from crude oil, gold, grains, equity indexes and Treasury bonds.
Given the current monetary, macroeconomic and geopolitical risk gold is an attractive alternative to debt, equities or other paper assets as collateral.
JP Morgans’s move shows how gold bullion’s fungiblity and tangibility as an asset makes it attractive and shows gold’s increasing importance in the financial system.
Interestingly, the CME is storing their collateral gold at JP Morgan Chase Bank in London. The exchange said it hoped to add additional depositories in the future but there has been no announcement of developments in this regard. FWIW................