Platinum, palladium price-setting technology ‘optimum’ for gold: LME

On Thursday, the biggest industrial metals bourse announced it would run a replacement for platinum and palladium fixings in London beginning Dec. 1. Currently the procedure takes place each day at 9:45 a.m. and 2 p.m. by phone, and it is conducted by BASF Metals Ltd., Goldman Sachs Group Inc., HSBC Holdings Plc. and Standard Bank Plc.

The LME’s new benchmark uses a purpose-built electronic platform that calculates the price based on buying and selling orders from market participants.

According to the LME’s spokeswoman quoted by the Metalbulletin, the gold market could benefit from the innovative price fixing system.

“We have a strong link to the physical industry and we’re hoping to be able to build on that to broaden what we’re offering to the gold community (…) Certainly, LMEbullion could be an optimum solution,” she was quoted as saying.

Well placed to run the gold fix

The exchange improved its technology to win the palladium and platinum bids, making it well placed to run the gold fix, Michael Overlander, chief executive of metals broker Sucden Financial, agrees.

“The LME has proven it can steal someone’s thunder,” he told FT.com (subs. required). “Ultimately it is far better for an independent body to manage this rather than a consortium of like-minded participants.”

London is the world’s largest trading center for precious metals. At the end of July, the London Platinum and Palladium Fixing Co. asked for submissions from groups interested in running the fixes. The LME’s victory surprised some in the industry.

A similar process for the silver benchmark resulted in the appointment of a partnership between CME Group Inc. and Thomson Reuters Corp., leading to the widespread assumption the CME/Reuters group would be favourites to take on the other metals benchmarks. The electronic silver fix kicked in two months ago.