Today’s AM fix was USD 1,322.50, EUR 968.58 and GBP 771.27 per ounce.
Yesterday’s AM fix was USD 1,326.75, EUR 970.98 and GBP 772.80 per ounce.
Gold climbed $0.01 or 0.13% yesterday to $1,326.90 per ounce and silver rose $0.11 or 0.52% to $21.16 per ounce.
Yesterday, the UK's influential Treasury Select Committee met to hear testimony from gold market analysts on the possibility that the London Gold Market Price Fixing mechanism may have been open to widespread abuse by member banks. Addressing the committee analyst Rhona O'Connell, is quoted in The Financial Times today, as saying that there are potential conflicts of interest among the panel banks who control the auction, as they they both act on behalf of clients and trade on their own books. Speaking on behalf of the Financial Conduct Authority (FCA), Mr David Bailey said that it was possible that abuse had taken place but that he has no clear evidence that this had actually happened.
Conceptually, the fix has a very important role to play in the gold market, allowing sizeable flows to be efficiently matched off without causing broader market disruption. The problem is that the banks and their clients in some cases and possibly those working for them, have every opportunity to game the system by acting on information in advance of its release or holding back information until it becomes opportune to release it. There are a number of "fixes" that could be deployed to reduce the scope for abuse. Namely, if the sessions were recorded and randomly checked, and secondly, if the participants were prevented from communicating with proprietary interest during the process the opportunity to trade off confidential market information should be greatly diminished. No system is perfect but the system should be designed to induce confidence and comfort in those parties that require such a service.
In other news, Janet Yellen slammed down the gavel to make it clear that the Fed’s continuing loose monetary policy will not include interest rate rises because the Fed has so many tools at its disposal.
The Fed chair said, “That said, I do see pockets of increased risk-taking across the financial system, and an acceleration or broadening of these concerns could necessitate a more robust macroprudential approach.”
Yellen appears less concerned with bubbles and more intent on patching them with her toolset. She commented, “Because a resilient financial system can withstand unexpected developments, identification of bubbles is less critical”.
Mark O'Byrne is on vacation this week. Stephen Flood is covering.
