Deutsche Bank leaves seat on London gold and silver fix

Deutsche Bank leaves seat on London gold and silver fix

Image from Wikimedia Commons.

Deutsche Bank, Germany's largest financial institution by assets, has officially quit its seat on the London gold and silver fix without finding a buyer, only three months after it announced its plans to withdraw from the price-setting process for both precious metals.

According to Reuters, the lender has given two week’s notice and it will stop being a part of the fix process as of May 13.

Deutsche Bank’s decision comes amid investigations by German and English regulators into suspected manipulation of precious metals prices by financial institutions.

Financial markets have come under serious scrutiny after the Libor (London Interbank Offered Rate) probe last year revealed that the London interbank offered rate was being manipulated.

Deutsche Bank’s seat resignation will leave four banks in charge of overseeing the gold fix and only two to determine global silver prices.

The Fixing

The rate-setting ritual dates to 1919. Dealers in the early years met in a wood-paneled room in Rothschild’s office in the City of London and raised little Union Jacks to indicate interest. Now the fix is calculated twice a day on telephone conferences at 10:30 a.m. and 3 p.m. London time. The calls usually last 10 minutes, though they can run more than an hour.

Firms declare how many bars of gold they want to buy or sell at the current spot price, based on orders from clients and themselves. The price is increased or reduced until the buy and sell amounts are within 50 bars, or about 620 kilograms, of each other, at which point the fix is set.

Traders relay shifts in supply and demand to clients during the call and take fresh orders to buy or sell as the price changes, according to the website of London Gold Market Fixing, where the results are published. The process is unregulated and the five banks can trade gold and its derivatives throughout the call.