Daily gold fix could be scrapped to stop price manipulation risk

Tim Wallace
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The World Gold Council wants to stop traders manipulating the benchmark (Source: AFP/Getty Images)
The gold price fix could become a continuous process, rather than a single daily event, to stop traders manipulating the benchmark, the World Gold Council (WGC) said yesterday.

And the banks who set the price could lose their position with more firms brought in to join them.

Currently the fix, the price used in transactions around the world is based on a short period of trading.

As a result, it is open to traders moving the price around artificially.

The WGC’s meeting of banks, exchanges, funds and regulators yesterday suggested introducing more continuity into the process to get rid of this weakness.

The five banks which currently set the fix are set to lose their position, in favour of a wider group of interested parties.

A new arrangement could include more banks, as well as gold buyers and sellers, such as funds, to rep­resent more market participants.

But London’s position is likely to be protected ­– as a deep, liquid, mature market it has a good chance of offering a fair price for the fix.

“We are at the start of a process that will lead to a reformed and modernised gold benchmark, which attracts a broader range of market participants,” said the WGC’s Natalie Dempster.

“It should be based on executed trades and a tradeable price, it should have highly transparent input data, should be calculated from a deep and liquid market, and represent a deliverable price.”

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