The first meeting to discuss modernisation of the mechanism that sets the price of gold will be held in London on July the 7th. The Financial Conduct Authority will be attending as an observer and representatives of the bullion banks, refiners, ETF and other gold investment product sponsors, exchanges, industry bodies, central banks and mining companies will be individually invited to participate. The move will stimulate transparency among the four investment banks HSBC, Barclays, Société Générale and Scotiabank which are involved in the Fix, a twice-daily auction to set the benchmark. These banks have not hitherto published the data they rely on.
Natalie Dempster, Managing Director, Central Banks and Public Policy at the World Gold Council commented: “The Fixing process was established almost a century ago, so it is not surprising that it needs to change to meet today’s market expectations for enhanced regulation, transparency and technology. Modernisation is imperative in order to maintain trust across the industry. This could come in the form of reform to the Fix to bring it in line with the IOSCO principles or it could see an alternative price benchmark emerge.
Our objective in convening this forum is to ensure that the full range of analysis and market perspectives from all parts of the gold supply chain are debated, understood and brought to bear on any potential changes. Any reform or replacement of the Fix, must serve the needs of all market participants and meet today’s requirements for transparency, liquidity and independent oversight.”
Following discussion with a number of industry participants, the World Gold Council has identified five principles to which any reformed Fix process or alternative should adhere. The World Gold Council believes the following characteristics, in addition to the IOSCO principles for financial benchmarks, are highly desirable for a modernised gold benchmark: it should be based on executed trades, rather than quote submissions; it should be a tradeable price, not simply a reference one; the input data should be highly transparent, published and subject to audit; it should be calculated from a deep and liquid market, through which a significant volume of gold flows are transacted; and it should represent a physically-deliverable price, as many users want to take physical delivery of gold.
