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Global: China could soon have a say in setting world’s gold prices

 |  February 18, 2014

A Chinese-controlled bank could soon have a say in gold benchmark price setting, say reports, as critics are calling for reform of global benchmarks in the midst of several price-fixing and market manipulation scandals.

Reports say London-based Standard Bank is the front-runner to acquire the spot on the gold price-setting panel left open by Deutsche Banks, according to a source.

Standard, which is majority owned by Chinese lender Industrial & Commercial Bank of China, would like face significant hurdles to acquire the position from Deutsche Bank. But according to reports, it would be a move in the right direction for some critics who are calling for more multinational representation in the benchmark-setting process as a way to deter market manipulation.

Regulators within the UK and Germany have recently eyed gold’s benchmark setting process. It’s part of a broader saga of alleged price manipulation schemes being investigated around the world following the widespread LIBOR scandal, in which banks were found to have manipulated the interest loan benchmark rate.

Five banks currently sit on the panel to set gold price benchmarks, say reports: Barclays, Deutsche Bank, HSBC Holdings, Bank of Nova Scotia and Société Générale. The lenders have a conference call twice a day to set the benchmark, though critics of the process note a lack of transparency in the discussions that lead to the decision.

Former US Mint chairman Edmund Moy, who current serves as chief strategist at Morgan Gold, has publically supported reforms to the process, calling for heightened transparency and more diverse input from banks based in countries like China or India.

China became the world’s largest consumer of physical gold last year, reports say, surpassing India for the first time.

Full Content: Wall Street Journal

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