Japan's Mitsui Set to Re-Enter Precious Metals Trading Market

Japan's Mitsui & Co is preparing to make a significant return to the global precious metals trading market after a nine-year hiatus. This move comes as gold prices have surged nearly 30% this year, prompting the company to re-establish its presence in a sector that has seen a decline in liquidity due to the exit of other players.

Key Takeaways

• Mitsui & Co plans to re-enter the precious metals trading market.
• The company aims to provide price risk management services to clients.
• This decision is influenced by a significant rise in gold and silver prices.
• Mitsui's return is expected to enhance liquidity in the global precious metals derivatives market.

Background on Mitsui's Trading History

Mitsui has a long history in the trading of precious metals, having started operations in this sector in 1970. However, the company exited the market in 2015 due to falling commodity prices. The recent rally in precious metals has reignited Mitsui's interest, leading to plans for a comeback.

Current Market Conditions

The precious metals market is currently experiencing a robust rally, with spot gold prices up 28% this year, marking the largest annual gain in 14 years. Factors contributing to this surge include:

• Anticipated U.S. interest rate cuts.
• Increased safe-haven demand due to geopolitical tensions, particularly in the Middle East.

Spot silver prices have also seen a significant increase, rising 31% since the beginning of 2024.

Mitsui's Strategic Plans

Mitsui is reportedly seeking a leader to head its re-entry into the precious metals market. The company plans to operate through its subsidiary, Mitsui Bussan Commodities Ltd, based in London. This subsidiary currently trades energy and base metals derivatives and is now looking to expand its portfolio to include precious metals.

Mitsui Bussan Commodities has stated that it is exploring opportunities to provide price risk management services within the precious metals industry. This initiative aligns with the company's commitment to diversify its offerings and better serve its clients.

Impact on the Precious Metals Market

Mitsui's return to the precious metals trading arena is expected to bring additional liquidity to the market, which has been affected by the exit of other trading firms. The World Gold Council has reported a 7% increase in worldwide gold trading volumes, reaching $259 billion a day, with the London over-the-counter market and U.S. futures market being the most significant trading centers.

As Mitsui re-establishes its presence, it could play a crucial role in stabilizing and enhancing trading activities in the precious metals sector, benefiting both the company and its clients.

Sources

• Exclusive-Japan's Mitsui prepares a comeback to precious metals trading, sources say, Yahoo Finance Canada.