LCH.Clearnet to take gold as collateral for trades

CLEARING house LCH.Clearnet yesterday added gold to the list of assets investors can post as collateral against trades in light of the meteoric rise in demand for the safe haven metal.

LCH will accept gold in 400 troy ounce gold bars from the end of October as it joins a group of highly liquid and high-grade assets such as AAA-rated bonds considered easy to sell quickly when needed.

LCH’s move acknowledges the soaring popularity of gold as a high quality asset, as well as the sheer amount of the metal being held by investors in portfolios at present.

“Gold is ideal; as an asset it typically performs well in times of financial stress, remains liquid and has a well established pricing mechanism,” said director David Farrar.

LCH said it had the backing of the World Gold Council, which is lobbying the Basel III council to let banks include gold in their Tier 1 assets.