Gold fix replacement gets more participants, no Chinese yet

[LONDON] At least six companies can set daily gold prices through an electronic auction that on Friday replaced the century-old London fixing ritual.

Thursday was the last day that Societe Generale SA, Bank of Nova Scotia, HSBC Holdings Plc and Barclays Plc agreed twice- daily rates by phone. The four banks, UBS Group AG and Goldman Sachs Group Inc can take part in the new LBMA Gold Price run by ICE Benchmark Administration that set prices at US$1,171.75 an ounce this morning.

Gold is the last precious metal to drop the London fixings after silver, platinum and palladium made way for similar auctions last year. More participants will make the US$18 trillion global gold market more transparent, according to IBA, which said that no companies from China are yet confirmed. The London Bullion Market Association said last month that Chinese banks were among those in talks to take part.

"We are looking for broad participation, there are a lot of interested parties," Finbarr Hutcheson, president of IBA, said at a press meeting in London on Thursday. Other companies are in the process of being approved, and Chinese participants may be added in the future, he said.

No Chinese companies ever directly participated in the 95- year-old fixing, used by miners to central banks to deal and value the metal. Gold demand in China, last year's second- biggest bullion buyer, more than doubled since 2009.

Anyone can follow the new auctions online, rather than needing a line to a fixing dealer. The process still occurs at 10:30 am and 3 pm London time, with buy and sell orders submitted electronically in rounds until a price is found.

This morning's price was set after five rounds and five of the six banks participated in the final round, according to ICE's website. The fifth round included bids totaling 29,239 ounces and offers of 43,934 ounces. That fell within a 20,000- ounce difference that allows the price to be fixed. Like now, ICE said a chairperson from a panel will determine a price for each round and it will then consult on developing an algorithm to do so. Mr Hutcheson declined to identify those on the panel.

Bullion also trades throughout most of the day in the over- the-counter and futures markets. The metal is down about one per cent in London this year, after declining in 2013 and 2014.

BLOOMBERG