Reunion to Discuss Modernisation of the Gold Fixing Mechanism

The precious metals market participants met yesterday (Monday) in London under the auspices of the World Gold Council (WGC) to discuss modernisation of the benchmark golf fixing mechanism, the London Gold Fix.

Refiners, financial products issuers (ETFs...), central banks, banks actually in charge of the fixing, stock market representatives and other professional organisms have participated in this first meeting.

In the course of the discussions, held in private, several key points have emerged, such as the need for a “sole”, “reliable” and “transparent” benchmark. Participants have also recognised the “importance of widening the number of participants in the fix, in order to reflect all of the market players.” The gold market represents $18 billion.

Currently, the gold fix happens twice a day (around 10h30 A.M. and 3h P.M., London time), during a telephone conference between four banks (Barclays, HSBC, Scotiabank and Société Générale). Starting with a set price, these banks exchange buy and sell orders until they find a balanced price. Deutsche Bank has stopped participating in the gold fixing process in mid-May of this year.

This process, judged by some to be archaic and opaque, is also suspected by others to be manipulated. Following the LIBOR and the foreign exchange rate rigging scandals, European financial regulating agencies are now seriously following the precious metal closely.

One example of manipulation, case in point, has been exposed, leading to a 26 million pound Sterling fine to Barclays in May by the UK financial cop (FCA).

“In the coming two weeks, we will have several follow-up meetings with the participants (...) and the World Gold Council will then produce a report on what we think is the optimal reform system,” Natalie Dempster, general director for central banks and public policy at the WGC, told France-Presse.