Century-Old London Gold Fix Said to Face Overhaul Amid Scrutiny

By Suzi Ring, Liam Vaughan and Nicholas Larkin Jan 21, 2014 5:53 AM ET

Photographer: Chris Ratcliffe/Bloomberg

Banks are considering an overhaul of London’s century-old gold benchmark used by miners, jewelers and central banks to buy, sell and value the precious metal, according to a person with knowledge of the process.
The five banks who oversee the so-called London gold fixing -- Barclays Plc (BARC), Deutsche Bank AG (DBK), Bank of Nova Scotia, HSBC Holdings Plc (HSBA) and Societe Generale SA (GLE) -- have formed a steering committee that’s seeking external firms to advise how the process could be improved, according to the person, who asked not to be identified because the review isn’t public.
The fixing refers to a rate-setting ritual dating back to 1919 in which representatives of the five member banks speak by telephone from a couple of minutes to more than an hour about buying and selling gold. The method has faced scrutiny in recent months, with regulators in London, Bonn and Washington -- who are already looking into manipulation of interest rates and currencies -- investigating how prices are set in the market.
While there’s no evidence the gold fix is being manipulated, economists and academics have said the way the benchmark is set is outdated, vulnerable to abuse, and lacking in any direct regulatory oversight. Deutsche Bank, Germany’s largest lender, said in a statement last week it plans to withdraw from the panels for setting gold and silver fixings.

OF COURSE If GOLD IS NOT MANIPULATED, THAT WOULD MAKE IT THE ONLY MARKET IN THE ENTIRE WORLD THAT ISN'T....