Gold short term analysis what you should know about new gold price fix mechanism by Bill Downey

Intraday Update - March 20th 2015

As you may or may not know, there is a new daily gold price fixing mechanism that began this week. Here is the information you should know about that change and the most frequently asked questions.

(NOTE: Gold short term charts and analysis will follow).

ICE Benchmark Administration (IBA) operates the new LBMA Gold Price Fix
LBMA Offices

The LBMA Gold Price yesterday replaced the historic London Gold Fix. The first LBMA Gold Price settled at $1,171.75. ICE Benchmark Administration (IBA) administers the “LBMA Gold Price”. They provide the auction platform, methodology as well as overall independent administration and governance for the LBMA Gold Price. The LBMA holds the intellectual property rights.

Background

The London Gold Fix pricing mechanism has been replaced by a new electronic LBMA price-discovery process from Friday, 20th March 2015. The price continues to be set twice daily (at 10:30 and 15:00 London GMT). The new LBMA Gold Price is operated and administered by an independent third party provider, ICE Benchmark Administration (IBA), who was chosen following consultation with market participants. IBA provides the price platform, methodology as well as the overall administration and governance for the LBMA Gold Price. The IBA's platform provides an electronic, auction-based, tradable, auditable and fully IOSCO-compliant solution for the London bullion market. For further information contact the LBMA at Au.Consult@lbma.org.uk.

Accredited Price Participants

There are six price participants who have been accredited to contribute to the LBMA Gold Price: Barclays Bank, Goldman Sachs International, HSBC Bank USA NA, Societe Generale, The Bank of Nova Scotia - ScotiaMocatta and UBS.

A set of Frequently Asked Questions is set out below

What has changed?

On 20th March 2015 the historic London Gold Fix was discontinued and replaced by the LBMA Gold Price. ICE Benchmark Administration (IBA) became the administrator for the “LBMA Gold Price”. IBA provides the auction platform, methodology as well as overall independent administration and governance for the LBMA Gold Price. The LBMA holds the intellectual property rights for the LBMA Gold Price.

What are the main features of the new process?

IBA host an electronic auction process for the LBMA Gold Price. The auction process is independently administrated and tradable, electronic and physically settled, conducted in dollars, with aggregated and anonymous bids and offers as well as being published on-screen and in real-time.

Is the LBMA Gold Price still set twice daily?

Yes, the price continues to be set twice daily at 10:30 am and 3:00 pm each business day.

Will the Gold Fixing Price and the LBMA Gold Price be calculated in parallel for a transitional period?

No. The last publication of the Gold Fixing Price was on the afternoon of March 19, 2015. The first publication of the LBMA Gold Price was on the morning of March 20, 2015.

Where can I source the LBMA Gold Price?

The LBMA Gold Price is available on the LBMA and IBA websites. In addition the data is available from a wide range of Data Vendors and Redistributors which are listed in the spreadsheet which you can download here.. The live auction can be viewed on Reuters using the codes 0#XAUFIXAM for the am auction and 0#XAUFIXPM for the pm auction and on Bloomberg using the ticker GOAULNAM for the AM auction and GOAULNPM for the PM auction (these tickers can also be accessed by running the {LBMA} page on Bloomberg).

What information is available at the end of the auction process?

At the end of the auction process, IBA will publish the benchmark price. IBA will also publish a Transparency Report showing for each round: the price in USD; the aggregated bid and offer volume; the number of participants; and the timings for each round.

What information is available during the auction process through redistributors?
The major market data redistributors will display: At the start of each round – the price that is being tried for that round of the auction At the end of each round of the auction – the aggregated bid and offer volume at the end of that round.

How should the price be referenced in documentation?

The official registered name of the benchmark is “LBMA Gold Price”. From the close of business on March 19, 2015 the London Gold Fix will cease. Any documentation which refers to London Gold Fix or similar should be updated to reference the “LBMA Gold Price” from March 20, 2015.

Documentation that specifically refers to the LBMA Gold Price published at 10:30am London time should be updated to refer to “LBMA Gold Price AM”. Documentation that specifically refers to the LBMA Gold Price published at 3:00pm London time should be updated to refer to “LBMA Gold Price PM”.

ISDA have made amendments to their definitions as follows:

"GOLD–LBMA PRICE-AM" means that the price for a Pricing Date will be that day’s morning London Gold price per troy ounce of Gold for delivery in London through a member of the LBMA authorized to effect such delivery, stated in U.S. Dollars, as calculated and administered by independent service provider(s), pursuant to an agreement with the LBMA, and published by the LBMA on its website that displays prices effective on that Pricing Date.

"GOLD–LBMA PRICE-PM" means that the price for a Pricing Date will be that day’s afternoon London Gold price per troy ounce of Gold for delivery in London through a member of the LBMA authorized to effect such delivery, stated in U.S. Dollars, as calculated and administered by independent service provider(s), pursuant to an agreement with the LBMA, and published by the LBMA on its website that displays prices effective on that Pricing Date.

Do I need to add a disclaimer to documentation that references the LBMA Gold Price?

Yes. A disclaimer should be added to documentation that references the LBMA Gold Price as follows: All references to LBMA Gold Price are used with the permission of ICE Benchmark Administration Limited and have been provided for informational purposes only. ICE Benchmark Administration Limited accepts no liability or responsibility for the accuracy of the prices or the underlying product to which the prices may be referenced.

Do I need to licence with ICE Benchmark Administration to use or redistribute the LBMA Gold Price?

IBA intends to introduce new licensing arrangements for LBMA Gold Price. However, in order to facilitate an orderly transition to the new auction process and administrator, the introduction of new licensing arrangements will not come into effect before September 1, 2015. All existing licences with the Gold Fixing Company will be terminated at close of business on March 19, 2015 and existing licensees have been informed by the Gold Fixing Company. Clients are not required to have a licence with ICE Benchmark Administration until September 1, 2015. Any party requiring an agreement to cover the interim period should contact ICE Benchmark Administration. Please contact ICE Benchmark Administration for more information on iba@theice.com or Tel: IBA on+44 20 7429 7100.

Is the LBMA Gold Price a regulated benchmark?

From 1 April 2015 the LBMA Gold Price will be a regulated benchmark, as it will become a ‘specified benchmark’ for the purposes of Art 63O of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.
The above information comes from the website; http://www.lbma.org.uk/lbma-gold-price

(end of Article)

Short term gold and silver price technical analysis

Gold Chart

Our forecast for gold to bottom in the first odds favored 1142-1146 area came in at 1142.67 in spot gold this week. The 2nd part of the forecast that odds favored gold would rally out of the FOMC meeting this week has met its 1st target resistance of 1175-1182 with an 1184 print high on Friday. Odds favor there should be a pause near this level and a pullback to retest the 1166-1172 area could develop next week into the Wednesday period. However, any close above 1185 will favor next week’s 1st target price of 1198-1205 will be underway. Support is now 1166-1172 and resistance remains for today is 1182-1185. The big question is whether gold can break above this channel line and as you will see in the silver chart, we think the answer is yes. If the short term cycles play out, odds favor gold is heading towards the 1222-1225 area in a short term rally into April 3rd (plus or minus 72 hours). Subscribers to www.goldtrends.net received e-mail right after the FOMC meeting that a LONG trade at 1159 had been established. Wednesday’s pullback price low was 1159 and thus subscribers were given a 2nd chance to enter a long position.

In summary, odds favor 1182-1185 as today’s high and the potential to pullback to 1166-1172 comes into play for early next week. Any close above 1185 favors the move to 1198-1205 is already underway. This TRENDLINE and 1185 is most likely place where it is decided whether we move to 1200 or not will take place.

Cycles
As discussed this week, the short term cycle turn for the March price low that was due March 20th (plus or minus 72 hours) is underway since the Tuesday low where the bottom happened 64 hours before the ideal hour for the monthly low. That low developed right at the downtrend line of our cycle chart and any close above 1185 will initiate the targets for this short rally at either 1198-1205 or 1222-1225 going into April 3rd (plus or minus 72 hours). Also discussed was the BIG signal that RSI (top of the chart) was giving for a price low.

Silver
Silver as already broken out of its main downtrend channel (red) and a 2nd channel puts the 1st target resistance in silver at 1687 for this current rally. If gold closes above 1185 and we are indeed heading higher into April 3rd, then the potential for silver will be 1725-1780. For now there should be good resistance at 1687-1692.

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Gold short term analysis & what you should know about new gold price fix mechanism