Gold Fix Drawing Scrutiny Amid Knowledge Tied to Eruption
25 November 2013
, by Liam Vaughan, Nicholas Larkin and Suzi Ring (Bloomberg)http://www.bloomberg.com/news/print/2013-11-26/gold-fix-drawing-scrutiny-amid-knowledge-tied-to-eruption.htmlExcerpt:Every business day in London, five banks meet to set the price of gold in a ritual that dates back to 1919.
Now, dealers and economists say knowledge gleaned on those calls could give some traders an unfair advantage when buying and selling the precious metal.
The U.K. Financial Conduct Authority is scrutinizing how prices are set in the $20 trillion gold market, according to a person with knowledge of the review who asked not to be identified because the matter isn’t public.
The London fix, the benchmark rate used by mining companies, jewelers and central banks to buy, sell and value the metal, is published twice daily after a telephone call involving:Barclays
, Deutsche Bank
, Bank of Nova Scotia
and Societe Generale
The process, during which gold is bought and sold, can take from a few minutes to more than an hour.
The participants also can trade the metal and its derivatives on the spot market and exchanges during the calls.
Just after the fixing begins, trading erupts in gold derivatives, according to research published in September.
Four traders interviewed by Bloomberg News said that’s because dealers and their clients are using information from the talks to bet on the outcome.
“Traders involved in this price-determining process have knowledge which, even for a short time, is superior to other people’s knowledge,”
said Thorsten Polleit, chief economist at Frankfurt-based precious-metals broker Degussa Goldhandel GmbH and a former economist at Barclays.
“That is the great flaw of the London gold-fixing.”How Gold Price Is Manipulated During The "London Fix"
25 November 2013
, by Tyler Durden (Zero Hedge)http://www.zerohedge.com/news/2013-11-25/how-gold-price-manipulated-during-london-fix