Drastic fluctuations in gold and silver prices are fueling precious metals trading! Global bank-related revenue is expected to reach a record high, and JPMorgan Chase (JPM.US) made a whopping $700 million in the first half of the year

The Zhitong Finance App learned that with the sharp fluctuations in gold and silver prices and the continued rise in investors' enthusiasm for trading, the precious metals trading business of the world's largest banks ushered in record profit performance. According to people familiar with the matter, J.P. Morgan Chase (JPM.US) earned about 700 million US dollars through gold, silver and other precious metals transactions and related services in the first half of this year. Financial services analyst firm Crisil Coalition Greenwich predicts that global banks' precious metals trading business revenue is expected to reach about 5 billion US dollars this year, the highest level since records were set.

As a major player in the global precious metals trading market, J.P. Morgan Chase is becoming an important beneficiary of this market boom. People familiar with the matter said that the bank's precious metals business set an annual revenue record of slightly more than 1 billion US dollars in 2020, but in the first half of this year alone, it has already achieved revenue of about 700 million US dollars, and full-year performance is expected to reach a new high.

At the same time, other large banks are also actively competing for share in the precious metals trading market. People familiar with the matter revealed that a number of banks have earned hundreds of millions of dollars from related businesses this year. Among them, Deutsche Bank (DB.US), which has re-increased its investment in precious metals trading business in recent years, has generated more than 200 million US dollars in related revenue so far this year.

The strong performance of the precious metals trading business was mainly due to large fluctuations in gold and silver prices, as well as a surge in investors' demand for related assets. Since this year, global geopolitical conflicts and trade tensions have intensified, driving sharp price fluctuations in energy and metals markets. For large Wall Street financial institutions such as Goldman Sachs (GS.US), Bank of America (BAC.US), and Morgan Stanley (MS.US), these market changes have created numerous trading opportunities and made the commodities business an important source of revenue.

Among them, the gold and silver markets are particularly active. Earlier this year, a massive influx of speculative purchases drove both gold and silver prices to record highs. As investors seek higher returns, trading demand for financial products such as short-term options and leveraged exchange-traded funds (ETFs) is also growing rapidly, bringing considerable revenue to the banking trading sector.

In addition to financial product transactions, differences in precious metal prices between different markets around the world have also created profit opportunities for banks. By transporting physical gold bars between different trading centers, some trading institutions use price differences between regions to arbitrage, and obtain huge profits from it.

Greg Frith, a senior precious metals trader at the global commodity trader Centalion Group, said at the London Bullion Market Association (LBMA) conference held in Italy this week that most of the industry insiders he met have achieved very good results this year, and many institutions have even set historical records.

As trading activities in the precious metals market become more active, some large banks are also seeking to expand their business layout in the London gold market. London is the world's largest gold spot trading center, and its trading system relies on a few large financial institutions to provide precious metals storage and clearing services. People familiar with the matter revealed that more and more banks are seeking to enter this market to seize the opportunities brought by the growth in precious metals trading.

Earlier this year, Citigroup (C.US) became the first bank to join the London Gold Clearing System in ten years, providing related services with J.P. Morgan Chase, UBS (UBS.US), HSBC Holdings (HSBC.US), and ICBC Standard Bank. According to people familiar with the matter, Deutsche Bank is also seeking to join this system. Earlier, it was also reported that Morgan Stanley is also interested in entering this market.

Angad Chhatwal, head of fixed income, foreign exchange and commodities business at Crisil Coalition Greenwich, said that global banks' precious metals trading revenue reached a record high last year, and this year's growth momentum continues, mainly driven by high volatility and strong investor participation in the gold and silver market.

Judging from market trends, January of this year was a particularly profitable period for the precious metals trading sector. At that time, global speculative capital poured into the gold and silver markets in large quantities, driving prices rapidly to unprecedented levels. Since then, with the outbreak of the Middle East war, a sharp rise in energy prices, and a renewed increase in market expectations for the central bank to tighten monetary policy, the prices of gold and silver have declined somewhat. However, the current spot price of the two precious metals is still more than double the level at the beginning of 2024.

Although sharp fluctuations in the precious metals market have created rich profits for banks, they also mean higher transaction risks. For trading institutions with large positions, if the market trend is contrary to expectations, rapid price changes may also cause significant losses.

Frith said that this year was not only Centalion's record year, but also the strongest year for many other trading institutions. However, at the same time, he cautioned that market participants should not let their guard down due to current profit performance. He pointed out that in the volatile precious metals market, once a mistake is made in the transaction judgment, previously accumulated profits may evaporate rapidly in a short period of time.