LONDON (Reuters) - The new London Bullion Market Association (LBMA) Gold Price went live for the first time on Friday, with Goldman Sachs and UBS joining the four members of the now defunct gold “fix” in setting its electronic replacement.
Goldman and UBS joined Barclays, HSBC, Bank of Nova Scotia and Societe Generale to set the new benchmark gold price, administered by ICE Benchmark Administration, at 1030 GMT on March 20.
The first LBMA Gold Price was set at $1,171.75 an ounce, after five rounds of an auction to strike a balance between bids and offers.
“The London gold fixing was eclipsed today,” Ross Norman, chief executive of Sharps Pixley, said. “The key question is, will users have the necessary confidence in the number? My gut feeling is that, with six participants, yes is the answer.”
ICE Benchmark Administration (IBA) was named by the LBMA in February as the new gold price benchmark operator. From Friday, it will provide the price platform and methodology as well as the overall administration and governance for the LBMA Gold Price.
“It’s a natural progression to go down the route of an electronic, transparent mechanism,” said Matthew Keen, formerly a director for gold fixings at Deutsche Bank, now at Jeffries Bache.
The London gold fix, set twice a day since 1919, most recently by conference call, was widely used by producers, consumers and investors to trade and value the metal.
Along with the silver, platinum and palladium fixes, it came under increased scrutiny in the wake of a scandal in financial markets over rigging of interest rate and foreign exchange benchmarks, most notably Libor.
Deutsche Bank gave up its seat at the fix early last year after failing to find a buyer for it. Representatives from the four remaining banks involved in the process later said they too would no longer take part.
Three exchanges now run price benchmarks for gold, silver, platinum and palladium. The London Metal Exchange has produced a price for platinum and palladium since December, while the Chicago Mercantile Exchange, jointly with Thomson Reuters, administers the silver benchmark.
Those in the wider market say the new processes for setting precious metals benchmarks has not led to much of a change in the way they operate.
“The new auctions haven’t really changed the way people execute business,” one precious metals trader said. “For us, as long as there’s some form of pricing mechanism, we’re happy.”
Reporting by Jan Harvey and Clara Denina; Editing by Veronica Brown and David Evans