Bloomberg: UK FCA Starts Investigating Gold Benchmarks Rates Setting


(Bloomberg) – A source who asked to stay anonymous said the U.K. Financial Authority is reviewing gold benchmarks as part of a wider investigation on how global rates are set.

The source asked to remain unknown as the probe hasn’t been a formal investigation yet, the FCA review is still preliminary, and the matter isn’t public. The source didn’t point out which gold benchmarks were under inspection.

One of the major and key benchmarks is the London gold fixing, an important that gauges spot price for physical gold which is set twice daily by five banks. According to a well-informed source about the matter, the U.S. derivatives regulators discussed reviewing how the gold benchmarks set rates at private Commodity Futures Trading Commission meetings.

Bill O’Neill, a Logic Advisors in Upper Saddle River partner, New Jersey says that they’ve seen a pattern of this sort of scrutiny across different markets. He added that he doesn’t think this will have a big price impact in gold prices, but it might change the way markets are traded.

Alleged abuses of a number of financial benchmarks are being examined by regulators around the world. They are companies that play a central role in setting rates. After the London interbank offered rate, or Libor, inquiries emerged around the benchmark interest rate of more than $360 trillion worth securities worldwide, that it was being manipulated, which triggering more inquires.

The scandal furthermore sparked reconsiders of how to advance how rates are set, so as to avert them from being rigged in the future.

A representative for the CFTC, Steve Adamske, and a spokeswoman for the FCA, Lara Joseph, declined to comment on the examination.

In supplement to Libor, controllers encompassing the FCA are inspecting rate-rigging in the $5.3 trillion-a-day foreign-exchange market, and a standard for interest-rate swaps, the ISDAfix.

Individually, the FCA will publish an update on its approach to supervision of commodities markets, including gold, before the end of the year, Joseph said.

Commodities dealers who purchase and deal as much as $5.67 trillion of raw materials a year state the standard prices for everything from oil to iron ore to petrol are incorrect as often as 27% of the time, according to a survey completed this year by Bloomberg.

The five banks which undertake the London gold fixing twice a day are Bank of Nova Scotia (BNS), Barclays Plc (BARC), HSBC Holdings, Deutsche Bank AG (DBK) and Societe Generale SA. N.M. Rothschild & Sons Ltd.’s agencies hosted the pricing, which begun in 1919, was undertook in the gathering held for 84 years there, and started taking place over the telephone in 2004.