Rigging the gold market

chewmylegoff

I'm not sure why the story linked to is evidence of the gold price being rigged. Perhaps the OP thinks the price of gold should be set only by reference to bids/offers submitted by trustworthy UK and European banks into a manual auction process conducted over the telephone and chaired by one of those banks. Like....errrr.....oh damn.

padington

'Now, tighter regulation of systemically important benchmarks, such as gold and Libor, makes them less vulnerable to manipulation.'

chewmylegoff

I still have no idea what your point is.

padington

chewmylegoff wrote: »

I still have no idea what your point is.

Oh well, jog on then.

purch

More transparency in the setting of benchmark rates is essential.

On days of yore LIBOR (all caps) the Gold Fix, and various FX fixings across Europe had only minor affects on a small number of transactions.

To think that retaining the same arcane system in the 21st century when Gazillions (that's a BIG number) of $/€/£/¥ are being traded (bet) on these fixings was ridiculous in the extreme, and it should not have taken these revelations to change the way these prices are fixed.

chewmylegoff

padington wrote: »

Oh well, jog on then.

You could try explaining it. You have titled the thread "rigging the gold market". Why is the link you have used which talks about a Chinese bank joining the new fixing process evidence that this is happening? I assume that is the point you are trying to make?

chewmylegoff

purch wrote: »

More transparency in the setting of benchmark rates is essential.

On days of yore LIBOR (all caps) the Gold Fix, and various FX fixings across Europe had only minor affects on a small number of transactions.

To think that retaining the same arcane system in the 21st century when Gazillions (that's a BIG number) of $/€/£/¥ are being traded (bet) on these fixings was ridiculous in the extreme, and it should not have taken these revelations to change the way these prices are fixed.

Personally I think less transparency and the addition of some randomisation in the actual calculation mechanism would be an improvement along with the benchmark administrator ultimately being able kick out any trades/submissions that they don't like the look of.

That way it isn't as easy for the participants to manipulate. If you know exactly how something is calculated you know what you need to do to change it. If FX traders did not know exactly when the benchmark window was and they were aware that the window might be moved retrospectively to discount any obvious anomalies where one participant just bashed the market for 60 seconds, I wonder whether they would have acted in the way that they did, for instance.

purch

I remember in ye olde days when there was a Frankfurt Fix, for the value of the DEM against all currencies.

Every day at around Noon (London) the Spot markets would go very quiet, and Dollar Mark would often move 40 or 50 points for no apparent reason, and then Reuters would announce the Frankfurt fix prices, and we could get back to normal and Dollar Mark would resume trading where it was before it all started.

Nobody seemed to know what or why, but something had happened at the Frankfurt Bourse and the Dollar Mark fix for the day was 50 pips higher than it was trading at the time.

I guess somebody needed it to be there.