JPMorgan has dominated, growing its share of the market with record revenue of around USD1 billion so far this year from trading, storing and financing precious metals, sources familiar with the matter told Reuters.
The Covid-19 pandemic has created a bonanza for investment banks dealing in gold, silver and other precious metals by triggering massive investor purchases and rupturing the normal workings of the market.
JPMorgan’s revenue by mid-November accounts for at least half of the USD1.7 billion to USD2 billion that consultancy McKinsey CIB Insights estimates the top 10 investment banks combined will make this year from precious metals, mostly gold.
The US bank’s commodities division is on track to bring in more than USD1.5 billion this year and could challenge Goldman Sachs for the title of top earner, the sources said. When approached, JPMorgan and Goldman Sachs declined to comment.
According to George Kuznetsov at McKinsey CIB Insights, individual investment banks have rarely made more than USD1 billion in commodities in recent years, and none has ever before earned more than around USD600 million in precious metals in a single year. It sits at the heart of the global bullion market, and its activities span trading physical bars to derivatives, running vaults and clearing trades in London, the biggest trade hub.
These investors pushed gold prices to record highs above USD2,000 an ounce earlier this year, driving profit has been the clamour for gold and silver from investors, mainly in Europe and North America, worried the pandemic and money-printing by central banks could devalue other assets.
In addition are profits earned on the Comex futures exchange in New York, where supply issues earlier this year made it more lucrative for those with access to physical gold to trade precious metals. Banks such as JPMorgan took advantage of opportunities on Comex and helped clients do the same.
Data from CME Group, which runs Comex, shows JPMorgan’s clients accounted for one-third of all trade in gold bars registered with the exchange in October, and more than two-fifths in June.
The revenue windfall will likely fade as trading on Comex reverts to normal patterns, but high gold prices and interest from investors mean this business will remain profitable.