goldmoney.com / By Alasdair Macleod / 30 May 2014
Last week the UK’s Financial Conduct Authority fined Barclays for rigging the gold price at a gold fix for the disadvantage of a customer and the benefit of the bank’s book. This news could not come at a worse time for the London Bullion Market and the London Gold Market Fixing Limited, the company directly responsible for the twice-daily fix. It may well lead to the end of the gold fix, the silver fix already being axed in August.
The fix is a process by which the four fixing members match their orders at an agreed price. The London bullion market is over-the-counter without the formal price records of a regulated market. The fix is therefore a needed reference price, and its status and the liquidity that follows have been central to London being the world’s major bullion dealing centre.
There are two problems with the fix. The first is it potentially distorts the market by delaying pre-fix business and bringing post-fix business forward. The second is that customers have to trust the fixing banks, who are also dealing for themselves into the fix. And this is what tripped up Barclays.