Important: FG Capital Advisors arranges secured bullion repo facilities through approved custodial banks and clearing members. Off-exchange bars are financed only after full assay, insurance, and vault due diligence.
Slashing Carry Costs: How Repo Lines Hedge Price Risk in Precious Metals
Long bullion positions tie up cash and incur storage charges. A repurchase agreement (“repo”) offers a straight-forward route to lower cost funding without closing the trade. By transferring London Good Delivery bars—or exchange-approved silver and platinum group metal (“PGM”) plates—to a lending counterparty, traders secure short-term liquidity while retaining economic exposure.
1. Core Mechanics
▪ The client delivers metal into the counterparty’s vault account.
▪ The counterparty wires an agreed percentage of spot value (the “cash leg”).
▪ On maturity, the client repurchases the metal at the original spot price plus an interest spread (the “repurchase leg”).
▪ Title remains with the counterparty during the term; mark-to-market safeguards both parties.
2. Why Repos Reduce Total Carry
- Funding Rate Advantage. An over-collateralised structure often prices inside unsecured borrowing costs.
- Storage Neutrality. Vault fees shift to the counterparty during the term, trimming the client’s overhead.
- No Physical Movement. Metal remains in an accredited vault, avoiding shipment and insurance add-ons.
3. Advance Rates and Haircuts
| Metal | Indicative Advance Rate | Main Haircut Drivers |
|---|---|---|
| Gold (400 oz LGD) | 85–92 % | Vault location, bar list, liquidity |
| Silver (1,000 oz COMEX) | 80–88 % | Spot volatility, brand recognition |
| PGM (Platinum/Palladium plates) | 75–85 % | Assay standard, market depth |
Ranges reflect facilities arranged during the first half of 2025.
4. Hedging Price Risk During the Term
The repo itself is mark-to-market neutral; any price swing affects collateral value and triggers a margin call or release. Clients seeking an earnings hedge frequently pair the repo with a matched forward sale or exchange futures, locking both financing and price exposure over the same window.
5. Risk Controls Valued by Lenders
- Independent daily price feeds from LBMA Trade Data or CME Globex.
- All-risk vault insurance with the counterparty named as loss payee.
- Right of audit at the storage facility, including bar count and security review.
- Immediate substitution rights for any bar found outside specification.
6. Current Rate Environment
Front-end base rates remain elevated relative to pre-2022 averages, which widens the spread between secured and unsecured borrowing. As a result, bullion repo demand from refineries, fabricators, and market-making banks has reached the highest level in five years. Advances above ninety per cent of spot are now achievable for Tier-1 vault metal, subject to tenor and counterparty limits.
7. Arranger Role of FG Capital Advisors
Our firm coordinates credit review, vault verification, and legal documentation across multiple funding sources. Clients receive:
▪ Indicative pricing within one business day following bar list submission.
▪ Multi-currency funding in USD, EUR, or GBP under International Swaps and Derivatives Association (ISDA) or Global Master Repurchase Agreement (GMRA) formats.
▪ Secure portal access for collateral monitoring and margin alerts.
To request a term sheet, please complete the enquiry or RFQ form at the foot of this page.
This document is marketing material and does not constitute legal, tax, accounting, or investment advice. All terms remain subject to credit approval and prevailing market conditions.
