With regulators investigating the possible manipulation of benchmark financial rates, the London Gold Market Fixing is scrambling to reform the way it determines gold prices.

The issue is whether financial institutions that determine benchmark financial rates like gold prices have either colluded with each other or profit from their insider knowledge. Investigations have already uncovered scandals involving Libor (the London interbank offered rate), FOREX (foreign currency exchange rates) and ISDAfix (interest rate swaps).

Regulators like the U.S. Commodities Futures Trading Commission, the U.K. Financial Conduct Authority and the German BaFin are now starting to probe on how gold and silver prices are set.

The five major banks that own London Gold Market Fixing have two conference calls a day. They buy and sell gold bars among each other and publish the mutually agreed upon prices on their website. These prices are one of the worldwide benchmarks on gold pricing. For a benchmark that is so publicly influential, the discussions between the banks are not disclosed and the banks can make bets on spot and derivative markets during the call. That has led critics to accuse the banks of potentially using information learned on the calls to unfairly profit.

While it is not yet clear that these banks are manipulating gold prices or taking advantage of their influence, it is clear that a process that has not changed much since 1919 needs to be modernized.

As a former regulator, I prefer that a market regulate itself and that government regulation be used sparingly and as a last resort. A self-regulated market depends on competition and transparency, neither of which exists in abundance with the London Gold Market Fixing.

While there might be some competition between the five major banks, it seems incongruous that European banks have more influence on gold pricing than the world's largest and most active markets for gold, namely India and China. And regarding transparency, even the bitcoin public register offers more data than the typical gold transaction does.

The time has come for some reforms in the way the price of gold (and other precious metals) is determined. These reforms would be better if the market and not the government drove them. But as long as transparency and competition increases regardless, the reforms will propel the Byzantine world of precious metal pricing into the 21st century.