The London Metal Exchange has reached a 50:50 revenue-sharing deal with a company founded by a group of banks to promote trade in its new gold futures contracts, sources said, aiming to overcome market scepticism surrounding their launch in June.

Usually, exchanges merely consult potential users about their needs when planning new financial and commodity contracts. But in this case, the LME has opted for a radical departure from normal practice as it tries to grab a piece of London's $5 trillion-a-year gold market.

Sources close to the matter told Reuters that the five banks and a proprietary trader which are shareholders in the new company have undertaken to bring guaranteed minimum levels of trade in the gold futures.

Based on GFMS calculations, Over the Counter (OTC) transactions nudged up slightly in 2016, but in general remain in a sideways trend when considered over the last decade. Gold trading on COMEX on the other hand has gained considerable traction over the years, jumping last year by 38% to represent almost one third of annual OTC trading activity; its highest on record.

For the quarter, gold futures and options average daily volume was up 51% year on year to 279,000 contracts, while silver futures and options average daily volume was up 45% to 80,000 contracts, CME said.

In their quarterly Global Hedge Book Analysis, Societe Generale and GFMS analysts at Thomson Reuters said the global hedge book total stood at 270 tonnes at the end of March.

While on its own, gold open interest - which merely represents the total potential claims on gold if exercised - is hardly exciting, as we have shown previously it has to be observed in conjunction with the physical gold that "backs" such potential delivery requests, also known as the "coverage ratio" of deliverable gold.

It is here that things get a little out of hand, because as the chart below shows, all else equal, the 43.5 million ounces of gold open interest and the record low 351,519 ounces of registered gold imply that as of Friday's close there was a whopping 123.8 ounces in potential paper claims to every ounces of physical gold.

This is an all time record high, and surpasses the previous period record seen in January 2014 following the JPM gold vault liquidation.

Clearly the paper markets, involving associated trades in ETFs, mining company stocks, derivatives, and so forth are much broader than the futures market alone. But the futures market is what one might call the locus of execution for our drama.

The premise, according to Murrell, is as follows: “The West (America & Europe) produces very little of the commodities that they need and consume, but have managed to more than compensate for this by having both a printing press (to print trillions of paper dollars on demand) and a futures market with which they can set the price of the commodities that they want, in the currencies that they print.

“On the other hand the producing countries, which actually own the resources, are forced to sell their commodities to the West at the prices – and on the terms – dictated by the futures markets. In other words, since the inception of futures markets in the West, the poor producing countries have been forced to sell their scarce and valuable commodities in exchange for the West’s freshly printed paper.”

The Shanghai Gold Exchange (SGE) is working on plans for China's first forwards and options in gold, sources say, potentially putting China ahead in the race to set an Asian pricing benchmark that might eventually rival the London gold fix.

The world has not yet begun to deleverage its crisis-linked borrowing. Global debt-to-GDP is breaking new highs in ways that hinder recovery in mature economies and threaten new crisis in emerging nations – especially China. This column introduces the latest Geneva Report on the World Economy. It argues that the policy path to less volatile debt dynamics is a narrow one, and it is already clear that developed economies must expect prolonged low growth or another crisis along the way.

Credit Suisse said on Tuesday it was winding down its commodities trading to focus its resources on more profitable areas of its business.