Morgan Stanley, Standard Chartered Join Gold Fix Panel -- Update

By Ese Erheriene

LONDON--Two more banks have been approved as direct participants in the electronic London gold fix said Intercontinental Exchange Ltd on Monday--taking the total number of participants up to ten.

Morgan Stanley and Standard Chartered will start contributing price information to the twice-daily LBMA Gold Price immediately, alongside Bank of China Ltd., UBS AG (UBSN.EB), Goldman Sachs Group Inc. (GS), Bank of Nova Scotia (BNS), Barclays Bank PLC (BCS), HSBC Holdings PLC (HSBC), Societe Generale SA (GLE.FR) and JPMorgan Chase & Co. (JPM).

"Being an active participant will enable Standard Chartered to better serve our gold client base, and help promote a transparent pricing mechanism for LBMA Gold Price setting," said Jeremy East, head of metals trading at Standard Chartered Bank.

ICE Ltd. also confirmed that China Construction Bank is on track to become the 11th gold auction participant. This follows the announcement last Tuesday that Bank of China, one of China's big-four state-owned lenders, had been chosen as the first Chinese bank to join the process.

According to market participants, attracting a second Chinese participant to the gold fix would be a coup for the London Bullion Market Association in its advertisement of the gold fix as a global benchmark.

"One of the themes the market has been talking about is the rise of volume trading coming out of Asia, particularly out of China," said Tom Kendall, a precious metals strategist at LCM Metals. Chinese participation "underlines its role as a global benchmark," he said.

China is steadily raising its profile in financial markets, from commodities to equities. The Asian giant is taking steps to make it easier for individuals and corporations to invest abroad. It is also gunning for its currency, the yuan, to be declared an official reserve currency, which would put it on a par with global powerhouse currencies such as the dollar.

For some investors, this diversification of participants could see participation extended to Indian banks. India vies with China as the No. 1 consumer of gold and the two account for more than half of global gold demand.

"It would be fitting if an Indian institution were represented at the fix. There is a centuries old cultural attraction to gold throughout the subcontinent, and the markets would...welcome official Indian participation," said Rick Rule, chairman of Sprott U.S. Holdings, a part of Sprott Inc. which oversees almost $5 billion in mining stocks and metals.

The LBMA gold price is used by a broad range of firms, from miners to jewelry makers, to settle billions of dollars' worth of gold trades daily.

Volumes have increased significantly since the electronic fix was launched in March, according to the ICE. Average daily volumes for the morning and afternoon gold auctions are more than double compared with the five months before the electronic launch, it said.

The change to an electronic platform was made as part of an effort to reform financial benchmarks in the wake of allegations of manipulation.

Write to Ese Erheriene at [e-mail]

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