Deutsche Bank will withdraw from gold and silver benchmark price setting, it said on Friday, as European regulators investigate suspected manipulation of precious metals prices by banks.
Germany's largest bank and some of its rivals are taking a battering over a series of other scandals and inquiries regarding manipulation of interest rates and foreign exchange.
Deutsche is one of five banks involved in the twice-daily gold fix for global price setting and said it was quitting the process after withdrawing from the bulk of its commodities business.
"Deutsche Bank is withdrawing its participation in the gold and silver benchmark setting process following the significant scaling back of our commodities business. We remain fully committed to our precious metals business," it said in a statement.
GOLD FIXING CRISIS?
A source close to Deutsche said on Friday it was seeking to sell its gold and silver fixing seats to another member of the London Bullion Market Association.
But Deutsche's decision may foreshadow moves by other fixing banks, a source in the London precious metals market said. "It wouldn't surprise me if the other banks were looking at pulling out as well. Why would they want the aggravation?" said the source, who declined to be named.
"The more worrying point is that, if you don't have the fixing, what do you have? There's a lot of contractual business done on the gold fix, and if you've got no basis for where the price is, someone is going to lose out."
Withdrawal from the fixing was not expected to have an impact on Deutsche's precious metals business, the source close to the bank said. "A very small volume of business is executed on the fix. The majority is outside of it."
Gold fixing happens by teleconference with four other banks: Bank of Nova Scotia-ScotiaMocatta, Barclays Bank Plc , HSBC Bank USA, NA and Société Générale, all of which declined immediate comment on the Deutsche move.
Chairmanship of the gold fixing rotates annually among the member banks. The last time a fixing seat changed hands was in 2004, when N.M. Rothschild and Sons sold their seat to Barclays. Two years earlier, Credit Suisse sold its seat to Société Générale.
At the start of each gold price-fixing, the chairman announces an opening price to the other four members who relay that to their customers, and based on orders received from them, instruct their representatives to declare themselves as buyers or sellers at that price.
The gold price is adjusted up and down until demand and supply is matched at which point the price is declared "Fixed".
The fixings are used to determine spot prices for the billions of dollars of the two precious metals traded each day.
Source:Reuters
