HSBC Holdings Plc lost around $200 million in one day in March because of disruptions to the gold market that caused prices to diverge dramatically in key trading hubs, according to a filing by the bank.
The one-day loss was unusually large for a market in which the leading banks — which include HSBC and JPMorgan Chase & Co. — typically hope to make around $200 million in an entire year. It far exceeded the maximum loss anticipated by HSBC’s value-at-risk models.
HSBC’s loss highlights the extreme nature of the disruption to the gold market in late March, as lockdowns closed refineries and grounded planes, strangling the supply routes that allow physical bullion to move around the globe.
The price of gold futures in New York and spot gold in London, which usually trade within a few dollars an ounce of one another, diverged by as much as $70 — the most in four decades. The divergence hit banks that are active in trading the so-called EFP, or Exchange for Physical, the mechanism by which traders switch positions between the New York and London markets.
HSBC, which had disclosed in a previous filing that it was hit by the gold market disruption, revealed the scale of the loss in a chart this week showing its daily trading profits for the first quarter.