By Matthew Cowley
LONDON--Six banks will participate in the auction to set the new
electronic gold price that will launch on Friday, according to
Intercontinental Exchange Inc., which manages the new platform.
Four of the banks-- Barclays PLC, HSBC Holdings PLC, Bank of
Nova Scotia and Société Générale SA--had participated in the
conference call used to determine the daily fixes, a system largely
unchanged for nearly a century. The newcomer unveiled by ICE on
Thursday is Swiss bank UBS AG; ICE said it would disclose the sixth
bank on Friday.
The gold market has a daily turnover of about $150 billion,
making it the largest precious-metals market. Much of that is
carried out in London, the traditional center for metals trading. A
wide range of firms, from mining companies to jewelers, use the
daily fixes to buy and sell gold.
Gold is the last of the precious metals to make the switch to an
electronic platform. Silver, platinum and palladium all made the
change in the second half of last year. The moves were prompted by
the intense regulatory scrutiny that arose after investigations
showed manipulation of other major global benchmarks such as the
London interbank offered rate, or Libor, and currencies.
ICE will manage the gold price on behalf of the London Bullion
Market Association, which will hold the intellectual property
rights to the fixes. The LBMA Gold Price will be will be set twice
daily--at 10:30 Greenwich Mean Time and 15:00 GMT, which currently
is 6:30 a.m. Eastern time and 11 a.m. EDT--in dollars, euros and
sterling.
The U.S. Mint said Thursday it would use the LBMA gold price to
price and settle all of its gold bullion orders, effective Friday.
BlackRock Inc. said it would make the switch for its iShares Gold
Bullion ETF on Friday.
Ruth Crowell, chief executive of the LBMA, said the new system
would improve the transparency of the gold price.
For the first time, market participants will be able to see the
amount of gold that is traded during each auction, and there will
be historical records of all trading that can be scrutinized by
them and regulators, said Finbarr Hutcheson, president of ICE
Benchmark Administration Ltd., a unit of ICE. ICE has no vested
interest in whether gold prices move up or down, he said.
On Thursday, the gold fix was set for the last time by private
telephone conference call between the group of four banks--the
system has been in place since 1919. The afternoon fix was set at
$1,166.00 a troy ounce, slightly higher than the morning fix at
$1,164.00.
The silver price made the move to an electronic platform last
August, with a system that is jointly managed by CME Group Inc. and
Thomson Reuters Corp. Platinum and palladium prices went electronic
in December. Their platform is managed by the London Metal
Exchange, which is owned by Hong Kong Exchanges & Clearing
Ltd.
Write to Matthew Cowley at matthew.cowley@wsj.com
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