Photo by: Duane Daws
JOHANNESBURG (miningweekly.com) – The World Gold Council (WGC), the market development organisation for the gold industry, convened a roundtable debate on Monday to discuss modernisation of the London gold fix, a century-old practice that is under scrutiny.
The UK's Financial Conduct Authority in May fined Barclays plc for manipulating the London gold fix, which is set by a group of four banks over a teleconference.
The meeting, attended by 34 delegates representing central banks, bullion banks, refiners, exchange-traded funds and other gold investment product sponsors, exchanges and industry bodies, was hosted by WGC CEO Aram Shishmanian.
Discussed were the requirements and desired characteristics for a reformed benchmark, along with the pros and cons of any alternative price-setting mechanism.
The key points emerging included the need for a single, trusted, benchmark reference price being in the interests of the millions of people involved in the gold market around the world.
The continuity of price discovery to avoid market disruption is seen as an imperative along with the need for expanding involvement in the process to reflect the full range of market participants.
Wanted is a local London price that is reflective of both the deep pool of liquidity available in London, as well as London’s historic and current position as the primary trading centre for gold.
The feeling is that any solution will need to be settled locally and physically and that there is a need for a transparent benchmark that mitigates any potential reputational risk for those administering the benchmark.
The debaters are seen to be at the start of a process that is expected to lead to a reformed and modernised gold benchmark that attracts a broader range of market participants.
“There was strong support for the World Gold Council’s key principles for reform. We believe it should be based on executed trades and a tradable price, it should have highly transparent input data, should be calculated from a deep and liquid market, and represent a physically deliverable price,” WGC central banks and public policy MD Natalie Dempster commented.
Steps to modernise the London gold fix follow the planned launch of the kilobar gold contract in Singapore, which will be traded transparently on the Singapore Exchange.