UPDATE 1-How London's gold and silver prices are 'fixed'

Thu Mar 14, 2013 2:52pm EDT
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* Market benchmarks being reviewed in wake of Libor affair

* Five banks take part in twice-daily pricing process for gold

* CFTC had talks on gold, silver fixes: Commissioner O'Malia

By Veronica Brown

LONDON, March 14 (Reuters) - London's gold and silver markets face the possibility of a probe alongside other benchmarks into price setting, putting a century-old practice under the spotlight after the Libor rigging scandal that exposed widespread interest rate manipulation by banks.

The U.S. Commodity Futures Trading Commission has engaged in "a couple" of conversations about whether the daily setting of gold and silver prices in London is open to manipulation, Commissioner Scott O'Malia said on Thursday, although he said the situation is "fairly immature in its development."

The Wall Street Journal, citing unnamed sources, reported on Wednesday that the CFTC was examining various aspects of gold and silver price-setting, including whether it is sufficiently transparent.

"What was stated in that story was more than I think we're doing," O'Malia told reporters at the annual Futures Industry Association conference in Florida on Thursday.

"I think we've had a couple of conversations. We're looking at energy, indexes, prices, how they're set. We'll look at all of the range of index-setting," O'Malia said.   Continued...