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Precious Metals – CTRM Considerations


This page has some high level notes about Precious Metals.  This is intended to share relevant information in the context of CTRM system design.



1) List of Precious Metals

2) Trading Attributes

3) Considerations for CTRM system design


1) List of Precious Metals






2) Trading Attributes


2.1) Units

Precious Metals may commonly trade in ounces or kilograms.  As little as one gram may be valued/valuable. 


2.2) Most commodities will typically trade as a function of price, meaning having a payment based on quantity * price. Precious Metals will have that as well.  In addition, precious metals will trade based on an interest rate, a ‘GOFO’ rate for Gold Forward rate.


2.3) Trade Types

Precious Metals will trade as


Options on Futures

Swaps (financial derivative)

Financial Options

Physical Buys and Sells


3) Considerations for CTRM system design


Note: In the example below, we’ll say ‘gold’ as an example and use that to refer to precious metals in general, where applicable.


3.1) Need a way to allow for payments based on interest rates (GOFO).  Some systems support this by modelling gold, etc., as if they were a currency.  That seems to be a workaround.  Ideally would be able to model them once as a commodity and have the system support payments based on interest rates or prices.


3.2) Physical Inventory

Gold, etc., will come in various forms.  Bars, Coins, etc. Depending on the situation, firms may need to track specific bars, coins, etc.  For example, you might have 100 gold bars, each with a different serial number that needs to be tracked.


In other cases, the gold is not track by specific bars, and is just an ounce or kilogram amount.


3.3) Flaking in transit

Gold bars will flake, i.e., have small pieces fall off, in transit.  Need to be able to account for account for that:

3.3.1) Track pre-shipping weight, arrival weight, and the amount that flaked off.

3.3.2) Allow for payments based on the gram difference, such as a fixed price for each gram lost, an index price based on the shipping date or an index price based on the delivery date.


3.4) Need ‘accounts’ for gold in warehouses.

Physical gold will be at a particular real world location.  In addition, a client can have multiple ‘accounts’ (i.e., like bank accounts) for the gold.  So need both the ability to model in a CTRM system transferring gold from one physical location to another as well as the ability to transfer from one account to another, even if the gold doesn’t move physical locations.


3.5) Pricing by Location and Coin/Bar type

Physical Gold will be valued differently based on where it is located, such as London or New York.  Also, physical bars will be valued differently than coins.  And each coin will be valued differently, such as US Eagles versus Canadian Maple Leafs, each being the commonly used name for one ounce coins.  A system will need to support these pricing variations.


3.6) Gold ‘bank accounts’.

Systems will need to be able to model something like a bank account, but for gold.  There needs to be a way to see

3.6.1) end of day balances of gold. i.e., need to be able to see back in time ‘forever’ what the end of day balance was.  Also need to be able to project daily balances based on planned future deliveries/transfers.  This needs to be by account.

3.6.2) Transfers of gold into or out of accounts each day.  Meaning each type of activity, such as buying, selling, transporting from one location to another or transferring from one account to another.  For example, if the prior start of day balance was 100 ounces and the current end of day balance is 170 ounces, then need to see if that was due to, for example, two buys of gold from different counterparties, one for 40 and one for 30 ounces.  In other words, a detailed view of the transactions, just like you might see on your bank account statement.

3.6.3) Same as above, but for the cash (e.g., USD) side of the transaction.  This would apply for a buy or sell and not necessarily for a transport or transfer.


As a generic note, this page is not intended to be a full design spec for gold for a CTRM system.  Instead, it is intended to be the seed of information to use as a newly elevated starting point.



Introduction to CTRM

Click on this link for a great introduction to CTRM software: Introduction to CTRM Software




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