Norbert Ruecker, head of Commodities Research at Julius Baer, explains why the end of London gold fix will have a small impact on prices.
The end of the London gold fix is historic but without fundamental impact on prices.
We expect the progressing economic recovery and the outlook for higher interest rates to curb safe-haven demand and we are maintaining our bearish view on gold.
Today is a historic day for the gold market. The London gold fixing goes digital. For decades a small circle of banks met daily at 10.30 am to determine at which price levels there would be equal buyers and sellers within their group.
The discussions will no longer be held in a conference call, instead the price setting is now conducted on a digital trading platform, involving a slightly enlarged group of participants.
However, as historic the change is for daily gold trading, it has little impact on the functioning of the global gold market and global price-setting processes. London is the best-known benchmark, but not the only trading place where information about gold demand and supply is transformed into prices.
New York’s COMEX futures market and Shanghai’s Gold Exchange are similarly important trading hubs, besides many others, providing even full-day continuous trading and thus price information.
Elsewhere, the most recent Swiss trade statistics confirmed rather lackluster Chinese gold demand.
Despite this week’s more dovish comments by the US Federal Reserve, the outlook for higher rates remains intact and bearish for gold.