Chinese Banks Likely to Join Gold Fix for First Time

The London Gold Fix is a nearly 100-year-old price-setting system for the international price of gold. Beginning in March, one or more Chinese banks may be included in the pool of fix participants for the first time ever.

Last year it was announced that the ICE Benchmark Administration (IBA) would take over the operation of the fix, previously run by the London Bullion Market Association (LBMA). The transition will take place in March and will purportedly make the daily gold fixing process more transparent by involving more banks. A host of banks are negotiating to participate in the fix.

The fix is currently run by just four Western banks – Society Generale SA, Bank of Nova Scotia, HSBC Holdings Plc, and Barclays Plc. Three Chinese banks are now members of the LBMA – China Construction Bank, Bank of China, and Industrial and Commercial Bank of China. Which of these are wrangling to join the fix in March is unknown.

We do know that China has aggressively liberalized its gold market in the past decade. In the past few years, it has also opened up its gold trading doors to more and more foreign banks. Now it has a chance to become a bigger player in Western markets. Here’s a few highlights of the Chinese gold trade to keep in mind:

The key takeaway from this latest news is that now China will have a more direct influence on the international price of gold.

The Financial Times has a brief video from last year that explains the London Gold Fix and the rational behind dissolving it:

Get Peter Schiff’s latest gold market analysis – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning more about physical gold and silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!