JPMorgan has Gained the Most from Precious Metals in 2020

US investment bank JPMorgan has posted record revenues of nearly $1 billion from precious metals so far in 2020. Revenues from its precious metals trading, custody and financing divisions place it as the leader in investment banking in this section, at a considerable distance from second place.

As reported exclusively by Reuters, JPMorgan has earned almost $1 billion so far this year, thanks to its businesses related to precious metals. It includes both trading and their custody or financing. 

The Covid-19 crisis has created a very favourable environment for investment banks’ gold, silver and other precious metals business. The coronavirus outbreak significantly increased investor demand and disrupted the normal functioning of the market.

JPMorgan has taken advantage of the situation. Its revenues in this area represent at least half of the 1.7-2 billion dollars estimated in mid-November.

According to sources cited by Reuters, JPMorgan’s commodities division could reach revenues of more than $1.5 billion this year. Thus, allowing it to challenge Goldman Sachs for leadership in this area.

George Kuznetsov, McKinsey CIB Insights analyst, points out that investment banks have rarely individually brought in more than $1 billion from their commodities business in recent years. None have raised more than $600 million in a single year with the precious metals business.

JPMorgan operates in the global market for precious metals. Its activities range from the sale of bullion to the sale of derivatives, through the custody of precious metals in its vaults. 

JPMorgan clients accounted for a third of the gold bullion operations in October

Increased demand has been one of the factors that has led gold to exceed $2,000 an ounce at the beginning of last August.

Also, JPMorgan and its clients have benefited from the situation generated in the New York COMEX futures market. It suffered metal supply problems in the months after the pandemic was declared. And had to seek new sources of gold supply to support the contracts.

According to data from CME Group, the company that manages COMEX, JPMorgan clients accounted for a third of the gold bullion operations registered in the market in October, and more than two-fifths in June.

Being one of the largest banks in the world allowed it to source and transport the metal in large quantities. Smaller operators could not do so.

The volume of profit will be reduced as operations in the COMEX return to normal. However, the high price of gold and the interest of investors will continue to make the business profitable.