| Pricing gold no longer by tradition { May 6 2004 } Original Source Link: (May no longer be active) http://www.nytimes.com/2004/05/06/business/worldbusiness/06gold.htmlhttp://www.nytimes.com/2004/05/06/business/worldbusiness/06gold.html
May 6, 2004 Pricing Gold but No Longer Standing on British Tradition By BERNARD SIMON Another piece of the British empire crumbled yesterday when no one raised or lowered the Union Jack to set the international price of gold.
Instead of meeting twice a day, as they have for almost 85 years, in the oak-paneled offices of the venerable merchant banking group NM Rothschild & Sons in London's financial district, four precious-metals traders - three in London and one in Paris - fixed the gold price on a telephone conference call, basing the decision on their latest readings of supply and demand.
"Nothing was that much different apart from the fact that we didn't walk down to St. Swithins Lane," said Simon Weeks, director of precious metals and foreign exchange at ScotiaMocatta, a unit of the Bank of Nova Scotia. The price was fixed at $392.55 an ounce yesterday afternoon, up from $391.25 when the traders met for the last time on Tuesday.
Yesterday, Mr. Weeks became the first non-Rothschild employee to run the proceedings. The bank, controlled by the family that supplied gold to the Duke of Wellington almost two centuries ago to help British forces win at Waterloo, closed its commodities trading business last month.
The Rothschild seat on the committee is up for sale. The bank's grip on the chairmanship had become a sore point with the other four committee members - ScotiaMocatta, Deutsche Bank, HSBC Bank USA and Société Générale. In the future, the chairmanship will rotate annually.
Philip Klapwijk, chairman of GFMS Ltd., a precious-metals consultants group in London, said the twice-daily London price fixings remained "very much the benchmark" for institutions taking physical delivery of gold.
But speculative trading and hedging with futures trading, Mr. Klapwijk said, had increasingly gravitated to the Comex division of the New York Mercantile Exchange.
The London Bullion Market Association, which controls the price-setting process, plans to introduce a live Web-based commentary on the daily price-setting this year.
In an effort to broaden London's influence in the international market, the association is seeking to help institutions in countries with expanding gold consumption - like China, India and Russia - to set up efficient markets.
The association has scheduled its annual meeting this year in Shanghai.
Until yesterday, the Union Jack played a crucial part in the price-setting process. A participant who wanted to interrupt proceedings to take a new buy or sell order or to consult his office would raise a flag on his desk. The price could not be fixed while a flag was raised.
Though electronic communication has replaced the face-to-face meeting at the Rothschild offices, the flag - albeit not a Union Jack - has not entirely disappeared from the proceedings.
From now on, those who want to interrupt the price-fixing on the phone must say the word "flag," followed by their company's name.
Mr. Weeks wrapped up yesterday morning's meeting - as he plans to do every day - with the words: "There are no flags, and we're fixed."
Copyright 2004 The New York Times Company
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