The World Gold Council is convening a conference in London to explore how to reform the broken London Gold fix that has become mired in scandal and controversy about market manipulation by participants.
The first meeting will be held July 7 with the U.K. Financial Conduct Authority attending as an observer, along with representatives of the bullion banks, refiners, exchange-traded fund and other gold investment product sponsors, exchanges, industry bodies, central banks and mining companies.
Natalie Dempster, managing director for central banks and public policy at the World Gold Council, explained the purpose of the conference.
"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. Modernization is imperative 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 [International Organization of Securities Commissions] principles or it could see an alternative price benchmark emerge," Dempster said.
"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," she added.
The World Gold Council, in discussions with industry sources, identified five principles it believes should be the basis of a new benchmarking system:
- 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 is transacted.
- It should represent a physically deliverable price, as many users want to take physical delivery of gold.
Dubai Exchange to Launch Spot Gold Contract
Seeking to capitalize on the disarray of the London Gold fix and wedge its way further into a position of exerting power over gold markets, the Dubai Gold and Commodities Exchange (DGCX) announced it will launch a gold spot contract this year that will make Dubai a major price discovery center for the yellow metal.
"We are working on the spot gold contract's specifications and timing the launch. We expect to launch it next two to three months," said Gary Anderson, CEO of DGCX.
About the Author: Mike Fuljenz
Mike Fuljenz is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of the NLG award-winning Michael Fuljenz Metals Market Weekly Report.
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