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By Peter Hobson
LONDON, April 9 (Reuters) – Insurance companies have started covering charter flights to transport gold, which has helped ease blockages in the bullion supply chain, which has resulted in strong diverging prices in different markets, said the London Bullion Market Association (LBMA) on Thursday.
Gold is generally moved between countries in the holds of passenger planes, but most flights around the world have been anchored by measures to control the spread of the coronavirus.
Fears that it would be impossible to ship gold quickly from London, a major storage center, to New York pushed American gold futures prices far above London spot levels. .
Bullion and coin dealers also faced shortages, with the demand for gold, traditionally seen as a sure asset, accelerating as the economic impact of the virus became clearer.
“Charter flights have now been approved by insurers for gold shipment,” said LBMA CEO Ruth Crowell in a conference call with market participants, calling it “a positive development and significant”.
Charter flights, however, remained expensive due to increased competition, she said.
The partial or total disruption of certain precious metal refineries is in addition to the disruption of supply, a particular problem because countries often want gold of different shapes and sizes, which means that the metal must be melted and recast before delivery.
Three factories in Switzerland, the most important refining center, partially reopened this week.
Crowell said refineries in China have reopened and three of the largest in the world in other countries – the Rand refinery in South Africa, the Perth Mint in Australia and the Royal Canadian Mint – have been recognized by governments as essential businesses.
“The refining capacity is certainly sufficient. The challenge… remains a logistical problem, ”she said.
Crowell also said that the operators of precious metal vaults had agreed to cooperate to increase capacity as best as possible if one of the vaults closed, but this mechanism had not been triggered because the vaults remained open. (Report by Peter Hobson Edited by David Clarke and David Holmes)