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CORRECTED (OFFICIAL)-UPDATE 1- Coronavirus pushes London banks to consider additional gold storage sites

(Removes reference to closure of Royal Canadian Mint after it clarifies that suspension of its operations does not include gold refining)

LONDON, March 27 (Reuters) - The five banks that clear gold trades in the London market are considering expanding their network of storage locations to other countries if it becomes impossible to fly enough gold in and out of London, said two sources involved in the discussions.

The move would be aimed at reducing the risk of disruption if metal cannot reach London, the world’s most important physical gold trading hub, where trades are underpinned by metal held in high-security vaults.

The five banks - HSBC, JPMorgan, Scotiabank , UBS and ICBC Standard - clear trades worth about $30 billion a day.

Lockdowns to contain the spread of the coronavirus have already shut down several major metal refineries and most global air travel.

This caused gold prices in New York and London to move sharply apart this week as traders worried that metal couldn’t be flown from London to New York to settle contract obligations.

The London Bullion Market Association, which oversees the London trade hub, on Friday said that it was looking with clearing banks and other market participants at “the feasibility of global delivery outside of London”.

The clearing banks are preparing to accept gold at vaults in Switzerland and elsewhere, the two sources said, adding that a final decision had not yet been taken.

The plans could include vaults that the banks operate as well as storage run by other companies, including refineries and logistics businesses, one of the sources said.

JPMorgan, HSBC and ICBC Standard declined to comment. Scotiabank and UBS did not respond to requests for comment.

The LBMA also said it was working with refiners, shippers and banks “to overcome travel constraints and ensure the physical movement of metal via, for example, chartered or cargo flights”.

Gold is typically transported in the holds of passenger planes, most of which are no longer flying.

The LBMA said there was more than enough refining capacity in the world to meet demand.

“While a few refiners have suspended production as a result of COVID-19, the other good delivery refiners are ready and able to accommodate the industry’s needs,” it said.

Good delivery refiners are those accredited by the LBMA. There are 72 of these in 31 countries, supplying the vast majority of the world’s gold.

However, several of the most important of these refiners have closed. Three in Switzerland - the biggest refining centre - suspended production this week. South Africa’s Rand Refinery has implemented a sharp reduction in output.

The supply disruption has coincided with a surge in demand for gold, which is often bought as a safe-haven investment in times of turmoil.

Reporting by Peter Hobson Editing by Mark Potter and David Goodman

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