by David Kranzler
Investment Research Dynamics
I truly thought I had seen all that was possible in the creation of paper gold when the Comex rolled out its “pledged gold” category which enabled technically insolvent banks like HSBC and JP Morgan – the only two Comex banks to have taken advantage of this new gold derivative product – to use paper gold to satisfy the performance bond requirement of CME clearing members.
But now the LBMA and CME operators have rolled yet another paper gold derivative productive in the hopes that the two entities can stave off defaulting on futures and forward contractual delivery requirements. The Accumulated Certificates of Exchange (“ACE”) facilitates the “fractional” delivery of a 400 oz gold bar.