UK Financial Regulators Sitting In on London Gold Fix Conference Calls

April 25th, 2014 by

gold-investigationBloomberg reports that multiple anonymous sources are informing them that the Financial Conduct Authority, the regulatory agency responsible for the integrity of the financial industry in the UK, is sitting in on the London Gold Fix conference calls as part of an “information gathering” process.

The London Gold Fix, is a process by which five of the world’s largest banks meet on a conference call twice each workday to set a benchmark rate for gold. Although gold markets now operate practically around the clock, the London fix is still used to set terms for billions of dollars of contracts daily.

The article quotes Simon Hart, a London-based lawyer at RPC LLP, as saying “The FCA is clearly trying to educate itself on the mechanics of benchmark-setting in the gold market. “It demonstrates that the FCA is looking into the suggestion that there has been benchmark rate manipulation, although that is very different from a formal investigation.”

The FCA has not accused or charged any bank with gold price manipulation, but will be visiting the offices of all five member banks of the London Gold Market Fixing, Ltd., during gold fix conference calls. The association has formed a steering committee to research how the fixing process could be modernized and made more transparent, after member Deutches Bank announced that German regulators were investigating the possibility of gold price manipulation, and had requested documents from the bank. DB also announced that it would no longer be participating in the London Gold Fix.

Rumors abound that Chinese megabank ICBC may be the front-running candidate to purchase Deutches Bank’s seat on the committee. As China is both the world’s #1 producer and consumer of gold, such a move to have a say in the benchmark rate would be logical.