Goldman Sachs and UBS joined the four existing members of the century-old London Gold Fix in the new London Bullion Market Association (LBMA) Gold Price electronic replacement, LBMA said. China, the world’s largest consumer of gold, has been snubbed.
Goldman and UBS joined Barclays, HSBC, Bank of Nova Scotia and
Societe Generale, as participants in the new London Bullion
Market Association Gold Price benchmark, LBMA reported on Friday. The first LBMA Gold Price
settled at $1,171.75 an ounce under the new system. The
electronic gold price replaced a system unchanged for nearly a
The world’s second largest economy, China, was expected to
participate directly in setting the new price fixing. However, no
companies from China have been confirmed, although Chinese banks
were among those in talks to take part. Chinese players may be
added in the future, Finbarr Hutcheson, president of IBA, was
cited as saying at a press meeting in London earlier on Thursday
by Bloomberg. No Chinese companies have ever directly
participated in the nearly 100-year-old fixing while gold demand
in China, last year’s second-biggest bullion buyer, has more than
doubled since 2009. The country is expected to consume almost
half the world’s gold output by 2020.
The new method for fixing the gold price daily replaced the
so-called London Gold Fix, a widely-used pricing medium that has
been around since 1919, LBMA said. Gold is the last of the
precious metals to switch to an electronic platform.
“For the first time market participants will be able to see
the amount of gold that is traded during each auction, and there
will be historical records of all trading that can be scrutinized
by them and regulators,” Finbarr Hutcheson, president of ICE
Benchmark Administration Ltd., a unit of ICE, was cited as saying
by Wall Street Journal.
The electronic auction process for setting the gold price is
designed and expected to be transparent and to allow as many
participants as possible.
“The new method for fixing the gold price daily will be more
reflective of that day’s collective price of gold on the world
market,” according to senior analyst at Kitco.com, Jim
Wyckoff, who also added that he believed the previous London fix
“was not greatly askew on that determination.”
— Bullion Vault (@bullionvault) March
The new method will probably be a better means of price discovery
and will increase participation, John Butler, chief investment
officer for Amphora Capital, told RT on Friday.
“The participants in the gold market will be more confident
that these fixing prices determined in London will simply better
reflect the true global price of gold and that confidence they
are getting. A fair, more transparent price could invite some
additional people into the gold market who previously were
skeptical that the information they were receiving was indeed
reliable,” Butler said.
The gold market has a daily turnover of about $150 billion,
making it the largest precious-metals market. The London Gold Fix
has been administered by London Gold Market Fixing Ltd. twice
daily and determined by just four participants that set it for
the last time by private telephone conference call on Thursday.
The Intercontinental Exchange Inc. (ICE) will manage the gold
price on behalf of the LBMA. The gold price will be set twice
daily as previously.