VANCOUVER — The gold industry is responding to growing scrutiny over the century-old method that determines the settling price of gold bullion. On June 18 the World Gold Council
– a market development organization composed of top gold miners (www.gold.org
) – announced that it was convening a cross-industry group to discuss the "modernisation of the London Gold Fix."
The process of gold fixing started in late 1919 and has since determined the price for settling contracts between members of the London bullion market, which indirectly influences the recognized rate that is used as a benchmark for pricing most gold products and derivatives globally.
The price-setting ritual occurs twice a day by phone between Societe Generale SA, Bank of Nova Scotia, HSBC Holdings Plc and Barclays Plc. Germany's Deutsche Bank stepped away from its seat at the table last month as part of a strategic move away from commodities.
Gold fixing takes place at 10:30 a.m. and 3 p.m. in London, with the participants serving as representatives of themselves and clients. The price is adjusted until the gold offered by either side is within 50 bars – or roughly 21,900 oz – at which point the fix is settled. Traders relay information to clients and accept pertinent orders during the process.
Revelations surrounding the Libor (London Interbank Offered Rate) scandal last year, which revealed rate manipulations, have resulted in renewed regulatory attention on financial markets. Word leaked in late 2013 that both the UK Financial Conduct Authority (FCA) and US Commodity Futures Trading Commission were taking a closer look at how gold prices are set.
Read the complete story at NorthernMiner.com/news/world-gold