Since the gold market continues to heat up we are seeing more creative ways for banks and individuals to get involved.  Many investors around the world are using gold as a way to hedge against inflation, central banks included.  Because a lot of big money has been flowing into gold J.P. Morgan Chase has announced a new program in which they will be accepting physical gold as collateral for transactions in securities lending and repurchase obligations.

John Rivett, collateral management executive for J.P. Morgan Worldwide Securities Services, said in a report with Reuters, “Many clients are holding gold on their balance sheets as an inflation hedge and are looking to make these assets work for them as collateral.” He added, “By combining our collateral management and vaulting capabilities, we provide clients with greater flexibility in how they mobilize collateral.”

J.P. Morgan is a custodian for some large ETFs and owns vaults worldwide to house the physical metal.  They have a recently built vault in Singapore and they reopened a facility in New York to accommodate the recent spike in demand for gold.

In the report J.P. Morgan said that the new program would allow its clients to mobilize collateral across borders and trading activities, “regardless of the underlying obligation, to extract maximum value and manage risk.”

J.P. Morgan is not the only the one with this type of program.  Other international clearinghouses have either announced their program or are getting close to putting the pieces in place.  CME has their program in place and LCH.Clearnet is close to making its move on the heals of the J.P. Morgan announcement.

These types of programs underscore that gold is increasingly seen as not only a safe haven but also a financial asset and alternative currency.  Gold is being viewed as a currency without counter party risk and therefore adds a layer of security to any dealings.  Gold is again re-establishing itself as a major part of the global economic system.

It still seems as though the general public has not participated alongside the big boys.  The average investor for the most part is just now waking up to the fact that gold is a viable option for safety and growth in any diversified portfolio.  As the public continues to catch on gold’s run will be prolonged.