LONDON GOLD FIXING RITUAL -
FLYING A FLAG FOR
by By William
From The MarketEye Financial
Post - Feb. 17, 1996.
(The price of gold was $405.00 falling back from
a recent high of $419.00)
"Give me control of a nation's money
I care not who makes her laws"
LONDON - The financial district known here simply as The City is a
hotbed of the loyal Order of the Masons, who have a penchant for strange
rituals.But Masonry has nothing to do with an odd little ceremony
performed twice every day in an office at N.M. Rothschild & Sons Ltd.
Five men talk on their phones for 10 minutes or so and then lower
tiny Union Jacks sitting on their desks. And that's it. The London gold
fixings is complete. It takes place at 10:30 a.m. and 3 p.m., like
clockwork. The same ceremony has been performed the same way, in the same
place, and with mostly the same firms participating since the first gold
fixing was enacted at Rothschild in St. Swithin's Lane on Friday Sept. 12,
Anachronistic or not, it works to give the market a snapshot
of the spot price of gold at a particular moment in time.
afternoon, the price was fixed at US$404.85, up from US$403.05in the
morning and US$404.60 at the late fixing Thursday, giving heart to gold
bugs who are determined to keep an ounce of bullion above the
US$400barrier that took so long to hurdle.
When the five
representatives met at Rothschild on that first Friday in 1919, gold was
fixed at four pounds, 18 shillings and nine pence- abut US$7.50 in today's
terms. The quoted currency was changed to US$s in 1968,but very little
else has changed in the intervening 77 years.
The participants at
the first fixing were from Rothschild, which chaired the meeting and every
subsequent one, Mocatta & Goldsmid, Pixley &Abell, Samuel Montagu
& Co. and Sharps Wilkins. This Friday, the firms represented besides
Rothschild were Deutsche Bank Sharps Pixley, Midland Bank, Republic Mase
Bank and Standard Chartered Bank-Mocatta Group. So three of the original
five are still showing the flag.
International gold trading is an
around-the-clock business, with the London Market overlapping those of the
Far East in the morning and New York in the afternoon. London bullion
traders can make deals from about7:15 a.m. to 7:15 p.m.
But twice a
day the representatives meet face to face at Rothschild to trade gold for
physical settlement. The dealing unit is a Good Delivery Bar, which must
weigh about 400 ounces and conform to specifications set down by the
London Bullion Market.
The chairman suggests an opening price,
which is reported by the representatives by phone to their dealing rooms.
The chairman then asks who wants to buy and who wants to sell and how many
400-ounce bars they wish to trade. If the quantities fail to balance at
the opening price, the chairman suggests a higher or lower one until a
balance is achieved. Then he announces the price to be fixed. The dealing
rooms can alter instructions to their representatives at any time during
the proceedings and that's where the tiny Union Jacks come in. The
representative signals he is changing his declared interest by raising his
flag. The chairman can't declare the price fixed unless al the flags are
down. All this sounds very quaint and out of touch with computer-driven
markets, but up to 20 tonnes of gold a day is thought to be traded through
Gold's performance this week, staying above the
breakout point of US$400after falling back from a recent high near US$419,
is a sign that quite a struggle is taking place between the bugs and the
The gold bugs reckon if the price can continue to climb from
Friday's fixing, it can be taken as a bullish sign. Otherwise, it's vital
that it doesn't break below US$400.
Ian Lamont, an analyst with
Yorkton Securities Inc. in London, concedes that world inflation is
relatively tame. Yet he says gold's future is made all the brighter by
"inflation" in the U.S. stock market, where too much money is chasing too
Lamont is sure some gold buyers are doing so as "a
hedge against the runaway asset price inflation " that has gripped stock
"Gold is the only financial asset to have depreciated in
value in the past 15 years and it stands out as a haven against the
massive price inflation sweeping through equity markets."
believes the end is nigh for the bull market in equities and that gold
offers insurance against the turbulent event.
While that's a
plausible enough scenario, Market Eye still believes gold is for
speculators and that gold stocks provide a better investment.Even then,
they, too, look due for a healthy correction.
So Eye will keep the
tiny Union Jack flying for the moment.
SEE The Secret Gold Treaty
Wisdom And Freedom
produced by WORLD
Copyright © 1999. ALL RIGHTS RESERVED.