OPINION – Gold fix may not follow in silver’s footsteps

Jul 7, 2014 - 11:04 AM GMT
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Opinion pieces are the views of the author: they do not represent the views of FastMarkets

Conventional wisdom, early in the negotiations surrounding the reformation of the London gold and silver fix processes, held that whatever the outcome for silver, gold would surely follow.

But conventional wisdom in this case appears to be crumbling.

For starters, the decision does not lay in the same hands.

While the discussions surrounding the silver fix was chaired by the London Bullion Market Association (LBMA), the World Gold Council (WGC) has taken a leading role in the consultation process for gold.

And far from just changing the locale of the discussions from The Royal Exchange to St Paul’s, this is likely to mean a very different focus.

The LBMA represents the London Bullion market – banks and traders actively involved in setting the price on a daily basis. The WGC on the other hand, is an industry body representing producers – and their needs and requirements may be very different from those of the banks and buyers.

Secondly, it may be in (just about) everyone’s interests to separate and distinguish the two benchmarks.

At present, there is a large overlap in both procedure and participants between the two benchmarks. However, this may mean that should some form of wrongdoing be uncovered in one, popular imagination would likely taint both. Thus a separation would safeguard one from the other.

So while news leaked out on Friday that the LBMA is likely to lend its backing to the joint bid of CME and ThomsonReuters to host the silver fix – pending regulatory approval – bidders for the gold fix, including the London Metal Exchange and Autilla, are unlikely to throw the towel in just yet.

(Editing by Mark Shaw)