Unallocated Precious Metals Accounts Agreement
Transactions in unassigned metal accounts are carried out by RRDB offices in Moscow. At present, LBMA does not publish figures on the London gold market, nor do it publish data on the volume of gold transactions or physical transfers made by its Bullion Bank members in the gold market, in relation to the volume of unassigned transfers or paper trading. Could we hide the gigantic activity of the paper gold trade? Note that at the end of 2016, the LBMA has promised that it will begin in 2017 to implement some kind of commercial report on Bullion market operations, but the details of such planned commercial communication remain unclear for the time being. It is obvious that there is no storage fee for keeping an account not allocated in the LBMA system, since the customer does not own any metal. Since banks generally pass on their costs to their customers, it is possible that no metal is stored on behalf of the bank, otherwise the bank would be motivated to transfer these costs to its customers. Bullion banks in general do not want to own physical gold because they encourage costs to be minimized. Similarly, the customer will not have insurance fees if he holds gold in an unassigned account, since no customer gold is stored. The only tax charged to a customer if they have an unassigned gold account is an account maintenance fee, as is a current account or savings account fee at a subsidiary bank. Although Bullion banks have access to gold lent to the Bank of England, this gold is owed to lending central banks and therefore has several receivables. If there was a rush to the fractional reserve bank system of customers who wanted to convert their unat allocated positions into allocated gold holdings, by analogy with a bank run where all customers want to withdraw their cash at the same time, this could lead to serious problems in the ability of Bullion banks to provide the necessary gold.
Such a situation would probably require a cash tally of customers` positions, a step that would cause the price of paper gold to fall, while the price of physical gold would rise. Most bullions negotiated and settled in London are on an unassigned account basis. This is an account in which the customer does not have specific bars, but is entitled to a quantity of metal. This is similar to the way a bank account works: because a customer does not necessarily recover the same notes that he originally deposited.