LBMA to consult market on gold auction during Asia time

(Add study details, SBMA and market participant comments throughout)

Singapore 17/10/2016 – The London Bullion Market Association (LBMA) will consult market participants about the possibility of an additional gold auction to set a pre-morning price, LBMA officials said at its annual conference here on Monday, October 17. 

ICE Benchmark Administration (IBA) currently conducts the LBMA gold price auction twice daily at 10:30 and 15:00 London time, with the price set in dollars per fine troy ounce.

The consultation between the LBMA, IBA, the Singapore Bullion Market Association (SBMA) and market participants will look at setting an additional price at 14:00 Singapore time.

“The introduction of the LBMA Gold Price Pre-AM would make the benchmark prices truly global by bridging the gap between the close of the US market and the opening of the London market,” the SBMA said in a statement.

IBA will be the administrator of the LBMA Gold Price Pre-AM and will provide the auction platform and methodology as well as oversight and governance. As with the existing AM and PM LBMA Gold Price Benchmarks, IBA would operate a physically settled, electronic and tradable auction process. 

The auction would be set in dollars per ounce for loco London gold and benchmark prices would be set daily at 14:00 Singapore Time in multiple currencies: the Australian, Singaporean, Canadian and US dollars, the offshore and onshore yuan, the Swiss franc, the yen, the rand, the rupee, the euro and the pound. 

“For the gold price to be discovered in Asia, it is paramount for the price to be set in Asian hours,” Lim Hng Kiang, minister for trade and industry and deputy chairman of the Monetary Authority of Singapore, said at the conference.

The introduction of such a price will help track Asian gold demand and Singapore’s development into a leading bullion hub, he said.

No timetable has been set for the initiative – this will depend on the feedback it gets and on the consultation between participants, LBMA officials said.

Market participants polled by FastMarkets at the conference have welcomed the possibility of an LBMA Asia gold price. 

“This is potentially of interest in Asia. People in Asia are currently using the OTC London price and now they can look to price their gold exposure through the benchmark in Singapore,” an analyst at a major global bank said.

Industry watchers also said they do not see such a price as competition for the Shanghai gold fix, which was introduced and has been administered by the Shanghai Gold Exchange since April this year – the Shanghai Gold Benchmark is still largely seen as a domestic price because it is yuan-denominated.

“An LBMA Asia price will complement the Shanghai gold benchmark. The region needs a price that is Asia ex-China to facilitate buying and selling in the region. In Asia, gold demand in India is huge,” a Shanghai-based precious metals trader said.

(Editing by Mark Shaw)

 

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