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World Gold Council Outlines Key Points Of Forum On Modernizing Gold Fixing

By Kitco News
Monday July 7, 2014 11:45 AM

(Kitco News) - There is a need for a trusted gold benchmark reference price that would have continuity and reflect significant liquidity, participants said during a roundtable discussion regarding reforms to the current gold fix Monday.

The World Gold Council, a market development organization for the gold industry, listed these as some of the key points made during a meeting that it convened on how to modernize the London fold fixing.

There has been scrutiny of the current twice-a-day gold fixings by some investors and regulators. Further, the London Silver Market Fixing Limited has said it will stop administering the London silver fixing after Aug. 14, and the London Bullion Market Association is working with the industry to find an alternative.

Monday’s meeting on gold was attended by 34 delegates representing all parts of the industry, including central banks, bullion banks, refiners, exchange-traded-funds and other gold investment product sponsors, exchanges and industry bodies, the WGC said.

Hosted by the World Gold Council Chief Executive Officer Aram Shishmanian, delegates discussed the requirements and desired characteristics for a reformed benchmark, along with the pros and cons of any alternative price-setting mechanism.

The WGC listed the following key points that emerged in the discussions:

  • the need for a single, trusted, benchmark reference price is in the interests of the millions of people involved in the gold market around the world;
  • the imperative for continuity of price discovery to avoid market disruption;
  • the importance of expanding involvement in the process to reflect the full range of market participants;
  • the importance of a local London price, which would reflect both the deep pool of liquidity available in London, as well as London’s historic and current position as the primary trading center for gold;
  • any solution will need to be settled locally and physically;
  • the need for a transparent benchmark which mitigates any potential reputational risk for those administering the benchmark; and
  • the requirement to separate market making from benchmark administration, and to meet all the other International Organization of Securities Commissions principles, including independent oversight.

“We are at the start of a process that will lead to a reformed and modernized gold benchmark which attracts a broader range of market participants,” said Natalie Dempster, managing director for central banks and public policy with the WGC.

“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.”


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By Allen Sykora of Kitco News; asykora@kitco.com



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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