In age of market scrutiny, who wants in on the gold "fix"?

Wed Jan 22, 2014 6:11am EST
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By Jan Harvey and Clara Denina

LONDON (Reuters) - Deutsche Bank's decision to put its seat at the gold fixing table up for sale has raised questions about the future of the price benchmark.

One stands out: who, after the Libor scandal, will want it?

Gold price setting or "fixing", determining the benchmark for the billions of dollars traded every day, is nearly a century old. The modern twice-daily system launched in 1968.

Unlike most commodities which are dominated by futures trading, gold is chiefly a cash market.

Involvement in the fix offers little financial benefit to members, but a seat at the table is prestigious. However, that may not be enough.

"It's a tough sale at the moment," one source in the London precious metals market said. "There's nothing really in it for the banks, except the opportunity to say that they're a fixing member, which carries a certain kudos."

Increased scrutiny, with regulators pushing for new rules on commodity benchmarks after the Libor scandal, threatens to outweigh that benefit, the source said.

Regulators including Germany's Bafin, Britain's Financial Conduct Authority and the U.S. Commodity Futures Trading Commission have increased scrutiny of commodity indices after the London Interbank Offered Rate, Libor, was rigged by British banks.   Continued...

Gold bars are displayed at the Ginza Tanaka store in Tokyo April 18, 2013. REUTERS/Yuya Shino