Gold Fix Probes in London Scare Off Singapore Competitors

Gold Fix members in London seek "external audit" of benchmark as would-be Asian hub pulls back from competing...

 

SINGAPORE won't follow the London bullion market by holding a daily "fix", according to sources quoted by a newswire today.

 

The Singapore Bullion Market Association has apparently rejected the move because, less than 12 months after proposing it, member banks have been scared off by regulatory probes into the global benchmark set in London.

 

"Because of these [London Fix] investigations, everyone wants to play cool on this topic," Reuters quotes an un-named source.

 

Two separate agencies meantime report that the London Gold Fixing Ltd, whose members agree the twice-daily Gold Fix so as to clear the maximum volume of outstanding client orders at a single price, have "formed a steering committee" to try and address accusations that the process lacks transparency and is open to abuse.

 

The Wall Street Journal, which says the committee is meeting today, says the London Fix members "seek an external audit of the process." Bloomberg News goes further, saying the steering committee will seek external, independent guidance on how to improve the process.

 

Again, the sources are un-named.

 

"While there's no evidence the gold fix is being manipulated," says Bloomberg News, which reported un-sourced comments about regulatory "scrutiny" in late November, "economists and academics have said the way the benchmark is set is outdated, vulnerable to abuse, and lacking in any direct regulatory oversight."

 

Last Friday saw an announcement that Deutsche Bank will quit the Fixes in gold and silver, citing a downturn in volumes which has affected its broader commodities business.

 

The move came the morning after the head of Germany's BaFin, the financial regulator in Deutsche Bank's home jurisdiction, linked precious metals fixes with the currency fixes now under investigation in the US, London and Germany.

 

Deutsche Bank last year opened gold vault space in Singapore for up to 200 tonnes.

 

"While Western financial giants have been exiting the high-risk, high-reward commodities trading business," says the South China Morning Post, "capital-rich Asian firms, including state-owned banks and brokerages from China, have seized the opportunity to enter the market."

 

The SMCP cites J.P.Morgan Chase and French investment bank Natixis as "retreating from the commodities business [which has] found no shortage of Asian players willing to take their place at the table."

 

Hoping to take Singapore's share of global gold trading up to 10%-15% within five or 10 years, the city state's government has made little secret of its intention to become Asia's gold trading hub, a title currently held by Hong Kong. It was said to be in formal talks with the Singapore Bullion Market Association about launching a local Gold Fix in April 2013.